What happened 

Shares of solar manufacturer Canadian Solar Inc. (NASDAQ:CSIQ) fell as much as 11.5% in trading Thursday after the company reported earnings that fell well short of estimates. At 2:30 p.m. EST, shares were still down 10.7% on the day. 

So what

Revenue of $912.2 million was well ahead of $692.4 million for the second quarter of 2017 and an estimate of $818.7 million from analysts. But net of $13.3 million, or $0.22 per share, was four cents below estimates, which shouldn't happen given the huge revenue beat

Utility scale solar farm with a setting sun in the background.

Image source: Getty Images.

Gross margin fell from 24.2% in the second quarter to 17.5%. Without anti-dumping and countervailing duty reversals, gross margin was 15.9%, in line with the guidance of 15% to 17%. 

Now what

This report was looked down on because the third quarter should have been ideal operating conditions for Canadian Solar. Demand is high and solar panel prices are up versus early in the year, which should lead to strong profitability. Instead, earnings were fairly weak, with a net margin of less than 2%. That doesn't give much wiggle room for the company if operating conditions get worse later this year or in 2018, which should concern investors. 

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.