Image source: Canadian Solar. 

What: Shares of solar module manufacturer Canadian Solar (NASDAQ:CSIQ) jumped as much as 19% after reporting first-quarter earnings. By 12:30 p.m. ET, the stock had settled in with a slightly smaller 14% gain for the day.

So what: First-quarter module shipments were 1,198 MW, higher than the 1,085 MW to 1,135 MW range management had given. Revenue of $721.4 million also beat expectations of $645 million to $695 million. Gross margin, a closely watched metric for solar manufacturers, was 15.6% compared to 12% to 14% guidance. Finally, net income was $22.6 million, or $0.39 per share.  

As far as guidance goes, management raised full-year revenue guidance by $100 million to $3.0 billion to $3.2 billion, which doesn't include a potential $200 million to $400 million impact from project sales. But it didn't change module shipment guidance of 5.4 GW to 5.5 GW.

Now what: The results were clearly better than the market was expecting and showed demand for the company's solar modules remains strong. Since the profitability is very low on selling solar modules, as this quarter indicates, it will be key to building a larger backlog of systems projects to be able to pay down $2.2 billion in debt. In the U.S., 1,185 MW out of 1,263 MW of backlog is due to be completed in 2016, and the company needs to find more high-margin projects to build next year. Until we get more clarity on that side of the business, I can't be too optimistic about Canadian Solar's shares.

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