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Wall Street and HollyFrontier (NYSE:HFC) investors were pleasantly surprised last quarter when the company posted earnings that blew away expectations. Last quarter's results and the announcement that the company planned to buy back $1 billion worth of shares over the next 12 to 18 months have been major reasons why shares of Hollyforntier have gained a market crushing 24% so far this year. Here's a quick look at what you should expect when HollyFrontier reports earnings on August 5th. 

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Where did that come from?
The financials of a refinery can be a tough nut to crack, because things like revenue growth aren't that important. HollyFrontier and other refineries are intermediaries between oil's end product and the raw feedstock. Since the price of these two commodities can swing wildly over time, it is much more important to look at the crack spread, which is refinery speak for gross margin. 

That is how HollyFrontier was able to increase its EBITDA by 15% last quarter compared to the year prior even though revenue actually fell 44%. Over those two time periods the crack spread improved from $14.75 per barrel to $16.69. Some of that had to do with the price differential between refined products and crude oil, but HollyFrontier was also able to improve profitability by increasing the yield of high value products -- think gasoline and diesel -- by 4%. It achieved this through bringing some of its new capital projects online and pushing its refinery utilization 4% higher than its 5-year average.

Encore performance?
Let's just say that last quarter's big surprise performance has upped the ante for HollyFrontier this quarter. Consensus estimates compiled by S&P Capital IQ put earnings per share for the quarter at $1.31, which is considerably higher than even last quarters' $1.16 surprise result. Part of that higher expectation is due to the fact that the increase in price for retail gasoline ever so slightly outpaced the price increase for crude oil. However, other efforts by the company to improve its liquids yield at its facilities will also be a major factor here. Also, since the company has no large facility turnaround projects slated for the rest of 2015, utilization rates should remain very high.

Another component that could help to significantly boost its per share earnings is the large amounts of shares that management has repurchased. In the first quarter HollyFrontier's management bought back 1.2 million shares from its current share repurchase program. On top of its existing buyback authorization of $462 million, last quarter management added $1 billion to what it plans to complete within 12-18 months. With about $1 billion in cash on hand and a 3% debt to capital ratio, management believes that the most effective way to add value to shareholders today is to leverage that balance sheet strength and buy back shares, which it sees as undervalued.

While some HollyFrontier investors my pine for the days of the special dividends, this buyback program should go a long way in creating shareholder value over the next several quarters.

What a Fool believes
Expectations are riding high for HollyFrontier, but that's what happens when a company routinely cranks out solid returns that are some of the best in the refining industry. Swinging commodity prices will always wax and wane and impact the overall bottom line for refiners, but HollyFrontier isn't waiting around for things to happen. The company's prudent investment strategy of investing in high return projects and pouring excess cash into cutting down the overall share count should go a long ways towards improving this quarter's numbers -- and those of several quarters to come. 

Tyler Crowe has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.