On Wednesday, Phillips 66 (NYSE:PSX) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Since ConocoPhillips spun off its refinery assets into Phillips 66 in early 2012, the refining company has seen its stock soar. But lately, concerns about falling spreads and greater regulation have threatened the company's future prospects. Let's take an early look at what's been happening with Phillips 66 over the past quarter and what we're likely to see in its quarterly report.

Stats on Phillips 66

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$41.44 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will the good times last at Phillips 66 this quarter?
Analysts have gotten a lot more optimistic in their views on Phillips 66 recently, raising their earnings-per-share estimates for the first quarter by $0.46 and boosting full-year 2013 calls by more than $1 per share. Yet the stock's 12% gain since last January has been tempered lately by a substantial April decline.

Phillips 66 has done its best to profit from the favorable conditions in the refining industry as it looks to buy its fair share of cheap U.S. crude and sell refined products on the world market at higher prices. The company's plan to buy 2,000 new railcars and its recent logistics agreements with Enbridge Energy Partners (NYSE:EEP) and Magellan Midstream Partners (NYSE:MMP) are designed to help it transport oil from shale plays like the Bakken and Mississippian Lime to its various refineries. With massive overseas demand, Phillips 66 has been able to increase its exports of refined products substantially, and the trend seems likely to continue.

But Phillips 66 faces new headwinds in the form of tighter regulation. Newly proposed EPA standards could cost the industry $10 billion upfront and $2.4 billion annually to reduce the content of sulfur and other potential pollutants, and although refiners may be able to pass costs through to consumers, it could nevertheless reduce gasoline demand in light of already high prices at the pump.

One big move that Phillips 66 announced late last month is its intent to do an initial public offering of a midstream master limited partnership. The company expects to raise about $300 million by selling off a portion of its Phillips 66 Partners subsidiary. In combination with its 50% joint-venture interest in the parent of DCP Midstream Partners (NYSE:DCP), Phillips 66's midstream assets have produced a substantial amount of its overall revenue.

In Phillips 66's quarterly report, be sure to watch for the company to explain its cost exposure to new regulations as well as the impact of falling Brent crude prices on its spreads. If the long boom for refiners is coming to an end, you should be able to see some hints of what's to come from the financials that Phillips 66 reports.

Click here to add Phillips 66 to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Motley Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends DCP Midstream Partners and Magellan Midstream Partners. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.