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* EPS $0.39 ex-items vs Wall Street $0.40 view
* Sees 2010 EPS $1.85-$1.89 ex-items vs Wall St $1.87 view
* Marlboro price gap lower than in past
* Altria shares fall 0.3 pct (Adds company comment on Marlboro price gaps, new products)
By Brad Dorfman
CHICAGO, Jan 28 (Reuters) - Altria Group Inc (MO.N) said high U.S. unemployment and a weak economy would create a tough business environment in 2010 and that U.S. states may raise cigarette taxes this year to fill budget holes.
The company, whose products include Marlboro cigarettes and Skoal and Copenhagen smokeless tobacco, posted a higher quarterly profit and forecast 2010 earnings in line with analysts' estimates on Thursday. It also said it would pay out a higher percentage of its earnings in the form of dividends.
Altria's Philip Morris USA unit increased prices on many of its cigarette brands last fall, but has lost market share as competitors like Reynolds American Inc RAI.N ratcheted up promotional spending.
Altria's share of the U.S. cigarette market fell to 49.4 percent in the fourth quarter from 50.9 percent a year earlier, with top-selling Marlboro declining to 41.7 percent from 42.1 percent.
"Reynolds was still quite promotional on Pall Mall in the quarter," Morningstar analyst Phil Gorham said. "In the longer term, I would expect that to stabilize, and I think Marlboro's market share will stabilize."
Altria said fourth-quarter profit rose to $726 million, or 35 cents a share, from $679 million, or 33 cents a share, a year earlier.
Excluding one-time items, earnings were 39 cents a share. Analysts on average forecast 40 cents, according to Thomson Reuters I/B/E/S.
Revenue, excluding excise taxes, rose to $4.1 billion from $3.83 billion, in line with analysts' estimates.
Higher priced cigarette makers have also been pressured by discount brands in the struggling economy. But Altria executives see that changing when a recovery takes hold.
At an average price of $5.41 a pack, the gap between Marlboro and the lowest price cigarette brand was 33 percent, leaving the company room to raise prices again when the economy improves, Altria CEO Michael Szymanczyk said during a conference call with analysts.
"I think that given the economic circumstances, the price gaps are appropriate, but they are on the lower side of what we've been able to sustain in better times," Szymanczyk said.
Altria forecast 2010 earnings of $1.85 to $1.89 a share, excluding one-time items. Analysts on average were expecting $1.87.
Cigarette shipments fell 11.4 percent to 36.2 billion in the quarter, a slightly smaller decline than analysts expected.
Smokeless tobacco shipments rose 3.6 percent to 168.3 million cans, helped by the launch of the new Copenhagen Long Cut Wintergreen product. The company also plans to launch two more Copenhagen varieties in the first quarter of 2010, though analysts have expressed some concern that the new products will take share from the company's Skoal brand.
The company's smokeless market share rose to 54.7 percent in the fourth quarter from 53.8 percent in the third quarter on an increase in Copenhagen's market share.
Altria raised its dividend payout ratio target to 80 percent of adjusted earnings per share from its previous target of 75 percent, citing a strong balance sheet.
Analysts expect competitors like Reynolds American to start paying more cash to investors.
Altria shares fell 6 cents to $19.93. The stock is up 13.5 percent since early October, compared with a 20.1 percent increase for Reynolds shares. (Reporting by Brad Dorfman; Editing by Lisa Von Ahn and Gunna Dickson)