Solar earnings are starting to flood the wires, and they're playing out much like we expected so far: Strong sales and profits during the first quarter but uncertainty heading into the second half of the year has been the theme. First Solar (Nasdaq: FSLR) said as much when it beat Wall Street's expectation and has seen its stock having a power outage until today.

So let's get caught up on what's been reported in the solar sector this week.

Earnings are solid, but caution reigns supreme
JA Solar (Nasdaq: JASO) was singing a familiar tune when it reported that sales nearly doubled to $556.4 million and profit rose 87% to $71.8 million, or $0.41 per share. That beat analysts' expectations of $551.7 million and $0.31 in revenue and earnings per share, respectively. But as usual, investors have focused on uncertainty in the Italian market, which will cause sales to slow in the second quarter.

Pricing pressure was already starting to show itself in the first quarter. Sales were down 5.5% sequentially, more than the 2.6% decline in shipments and gross margins fell 1.9% to 17.3%. None of this is shocking as the earnings beat demonstrates, but it shows that we're heading into a year where uncertainty will reign.

Canadian Solar (Nasdaq: CSIQ) also reported earnings yesterday and slightly beat expectations. Revenue reached $443.4 million, and net income was just $5.9 million, or $0.13 per share. But that included a $17.2 million currency hedging loss, so if you strip that out earnings would have been $0.44, three cents better than estimates.

Like JA Solar, Canadian Solar has margins that fall well below industry leaders. This quarter, gross margin fell to 14.7% from 17% in the fourth quarter of 2010. Margin level is something investors should watch closely and is a major differentiator between competitors.

A solar flare burning out
Energy Conversion Devices (Nasdaq: ENER) is in hot water after its CEO resigned and the company reported earnings that show serious concerns about the company's viability. In the fiscal third quarter, revenue declined 70% to just $21.5 million and a net loss of $243.2 million, or $4.88 per share. Yes, that's more than three times the company's stock price, although most of it was a non-cash writedown.

I warned early this year that Energy Conversion Devices would be a landmine for 2011, and it appears ready to explode. If juggernauts like First Solar, LDK Solar (NYSE: LDK), and JA Solar are having trouble in Europe, Energy Conversion Devices will be crushed there.

Other news and notes
Trina Solar (NYSE: TSL) and Yingli Green Energy (NYSE: YGE) both cut shipment outlook this week. Trina expects shipments were between 320 MW and 322 MW in the first quarter, lower than more that 351 MW it previously expected. Gross margins are still expected to be near the industry lead at 32% to 32.5% for in-house production.

Yingli said shipments in the first quarter would be down by "a low teen percentage" sequentially from an expectation of growing shipments by a single-digit percentage. Gross margin will come in slightly behind Trina Solar at 27% to 27.5%.

First Solar added more muscle to its power plant business when it signed a deal with China Power International New Energy Holding Limited. The new partner has 2 GW of projects planned in China by 2020 and will help take some financial burden off First Solar's project development arm.

Foolish bottom line
This quarter, we're starting to see the separation of top tier solar companies and how their superior technology and business plans are paying off for investors. As uncertainty hits Chinese suppliers, First Solar and SunPower have been able to leverage their power plant development units to ease investors' fears of falling demand relative to a rise in supply. First Solar's pop today after its CPINE partnership shows just how much value this holds for investors.

We're also seeing a slight separation between top- and mid-level Chinese suppliers. Trina Solar and Yingli Green Energy may be shipping slightly fewer modules than expected, but their superior margins give them leeway to lower prices in the second half of the year and can still remain profitable if it comes to that. JA Solar and Canadian Solar don't have nearly the margin to do that. If you're going to invest in Chinese solar stocks, I would stick to margin leaders in this tumultuous year.

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