Sometimes even the leaders fail to impress. After a string of consecutive earnings beats, JinkoSolar Holding Company (JKS -0.14%) reported a first quarter loss of $0.20 per diluted share versus consensus analyst expectations of a profit of $0.40 per share.

The lower than expected earnings marked the first earnings disappointment for the leading Chinese solar company in three quarters. 

Still for every cloud, there is a silver lining, and JinkoSolar's quarter had items that continue to impress such as the company's strong revenue and shipment growth, which grew 73.1% year over year and 71.6% year over year, respectively. 

The company's cost of production and module average selling price also continued to improve. All in all, JinkoSolar's quarter was a mixed bag.

Lackluster results but improving competitiveness
One reason for the lower than expected earnings was a $22.1 million foreign exchange loss that JinkoSolar booked due to the Chinese Yuan depreciating versus the U.S. dollar. 

JinkoSolar's earnings per share would have been 16 cents higher without the writedown. Since the Chinese economy is still weak, the trend of depreciating yuan could continue for several more quarters before it turns around.  

Another reason for the earnings disappointment was weaker than expected Chinese demand. At the beginning of the year, most solar pundits expected China to contribute 8 GW of distributed demand and 6 GW of utility demand in 2014, but due to tighter financing conditions, many solar analysts now expect China to contribute only 2 GW of distributed demand and 6 GW of utility demand.

Since China made up 48.9% of of JinkoSolar's total revenue in 2013, lower Chinese solar demand negatively affected JinkoSolar's top and bottom lines.   

On the bright side, JinkoSolar's core fundamentals are still strong. JinkoSolar's gross margin for the first quarter, for example, held steady at around 24% versus 24.7% last quarter while the company's average selling price increased to $0.64/watt from $0.63/watt one quarter ago.

The company also managed to decrease its production costs to 47 cents/watt from 48 cents/watt one quarter ago. 

The bottom line
While Chinese demand has been lackluster this year, the long-term outlook for Chinese solar remains unchanged. China needs as much solar energy as it can get in its war against pollution.  

And as the sector leader in China with the lowest cost of production and highest gross margins, JinkoSolar is arguably in better shape to capture that opportunity than any of its Chinese peers such as Trina Solar Limited (NYSE: TSL) and Yingli Green Energy (NYSE: YGE) . Because it has low costs, JinkoSolar can capture more market share by undercutting the competition in good times. With higher gross margins and a $1 billion dollar  deal from China Development Bank, JinkoSolar can outlast its weaker rivals in bad times.

The lackluster quarterly results may also be a one time aberration -- the first quarter is typically a weak quarter in the solar industry due to winter weather hindering installations. Business is expected to accelerate for the remainder of the year. JinkoSolar, for example, expects module shipments to increase by around 30% next quarter and reaffirmed guidance for the full year.  

Yingli Green Energy and Trina Solar also reaffirmed guidance for the full year as well. Despite the recent weakness, the long-term picture for JinkoSolar remains very promising.