Earnings season is under way, and the biggest domestic players in the solar production industry both beat third quarter projections. First Solar (NASDAQ:FSLR) and SunPower (NASDAQ:SPWR) both posted earnings and revenue beyond analyst estimates.  Though the financial results were similar for both companies, the market responses were not. First Solar saw a huge 18% gain on the day results were released, while Sunpower opened 10% lower the day after earning were released. The major difference: First Solar investors were pleasantly surprised, and Sunpower investors were not. 

Earnings summary
Analysts expected First Solar earnings of $1.00 per share, equal to what was realized in the third quarter of 2012. Investors were more than surprised with the report of $1.94 per share. Anytime a company can nearly double earnings expectations, investors are likely to be happy. Or maybe not.

SunPower beat the expected $0.25 earnings per share by posting an impressive $0.44 per share, a 76% earnings beat. Add to that the fact that third quarter earnings from the year prior amounted to only $0.03 per share, and one would expect investors to be ecstatic. Simply put, this was not the case.

The reason for such disparate reactions is the combination of multiple issues, two of which I think weigh heavier on investors' minds. The obvious first reason is the forward projections reported along with earnings for both companies. The second more subtle reason is that investors don't view both companies in the same light.

Forward projections
First Solar beat their earnings projections, and accordingly updated their 2013 guidance to reflect the positive result. Along with the 12% jump in projected earnings per share for the year are the especially encouraging increases in both realized and projected gross margin. While the third quarter financial results for First Solar were not all positive, the general optimism in the forward guidance had a very positive spin.

SunPower also increased its 2013 per share earnings guidance beyond analyst estimates. The one glaring drawback in the third quarter report was the drop in 2014 earnings projections below analyst estimates. The market response to the news is absolutely short-term and overzealous, as the primary reason for the drop is on account of operating expenses related to expanding capacity, which is exactly what should excite investors looking for long-term returns.

Investor views
Outside of the forward guidance, the big numbers for First Solar and SunPower tell a very similar story. The difference is in how investors view the two companies. First Solar has its earnings bar set high, and when it beats projections, investors respond. Furthermore, First Solar is trading at a P/E of around 12 (which was lower yet before the big jump), a remarkably low ratio compared with the rest of the solar industry and the potential for growth. In those regards, First Solar behaves more like a utility with large-scale projects that should deliver somewhat consistent profits. When net sales and earnings make a big jump, investors are caught off guard and respond intuitively and immediately.

SunPower has not demonstrated the long-term sales and earnings to be viewed more like a utility, and instead is better viewed as a company in a high-growth industry. With more exposure to the residential sector compared with First Solar's reliance on utility-scale projects, this view seems fitting. One major thing that investors should look for in such a stock is a growing forward guidance. SunPower projected a decrease in earnings for 2014, which baffled investors looking for the quick growth expected by a higher-risk company in a growing industry.

Furthermore, SunPower has a recent history of beating its quarterly projections, so the massive third quarter earnings beat may have been expected to some extent, and thus couldn't compensate for the projected 2014 earnings decrease.

The takeaway
Looking at First Solar as a utility stock can help explain how the market responds to its financial news. Likewise, viewing SunPower as a high-growth solar stock is the necessary context for predicting and understanding the market response. With that in mind, First Solar needs to maintain high margins and consistent revenues to succeed as a utility.

SunPower, on the other hand, needs to show the potential to grow. Decreasing 2014 earnings projections has investors scared in the short term, but the accompanying capacity expansion is the bigger indicator that investors should be looking at to see how SunPower will grow.