DEVENS, Mass. ( TheStreet) - Evergreen Solar ( ESLR) was able to beat the Street consensus with its earnings loss and revenue in the second quarter. It's something of a pyrrhic victory for the U.S. solar company, though, and the Street will likely be more focused on Tuesday morning's earnings conference call.

An update from management on its time line for a full ramp in its China manufacturing plant remains the key issue for Evergreen regardless of the earnings report.

Evergreen shares were up more than 7% in the after-hours session on Monday on the earnings. However, investors should keep in mind that for a stock trading under $1 a share, a 7% hike amounts to 5 cents, and the action may not be indicative of the way Evergreen will trade after its management conference call tomorrow morning.

Additionally, while Evergreen reported an earnings loss of two cents -- versus the Street consensus of a loss at 11 cents -- there were several one-time charges. The net loss for the second quarter was $3.3 million, compared to $23.9 million in the first quarter. The second-quarter net loss included approximately $24.8 million of net gains on the early extinguishment of outstanding debt, and a $3.2 million gain on the reversal of a portion of the Sovello impairment, which occurred concurrent with Evergreen's sales of the German joint venture during the quarter.

Evergreen, which does not hedge its currency exposure, had a foreign exchange loss of $6.9 million.

The second quarter operating loss for Evergreen was higher, at $15.5 million, than the first quarter operating loss of $14.1 million. Evergreen said in its earnings release that lower average selling prices and an increase in start-up costs associated with the ramp of the new China facility were the reasons for the increase operating loss.

Evergreen's China ramp is critical to bring down its cost per watt. Evergreen showed improvement in cost per watt and gross margin in the second quarter. Cost per watt decreased to $1.94, and gross margin improved from 7.7% to 8.6%. These are most likely to be judged as modest improvements by the Street, however. Evergreen Solar revenue of $84.5 million was also up sequentially, 7.7% higher than first quarter revenue.

However, given the sold out demand conditions in solar, small improvements in gross margin and cost per watt are not the answer to Evergreen's long-term problems.

"Demand for Evergreen's panels continues to be robust into the third quarter. In this environment, we are planning to produce about 45 megawatts for the quarter, including our initial ramp toward 25 megawatt per quarter capacity from Wuhan," said Evergreen Solar CEO Richard Feldt in the earnings statement.

Still, it is when Evergreen will get to 100 MW, 200 MW, or 500 MW on a cost productive basis that will move the Evergreen Solar needle away from the penny stock universe and verge of a reverse stock split on which the company currently is positioned.

"Even with improvement, the gross margin is still nowhere near anyone else out there. What management says about the China ramp, and any improvement over what they have told us to expect in the past, is the important milestone. Everything else looks more or less in line," said Raymond James analyst Alex Morris.

-- Written by Eric Rosenbaum from New York.

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