NEW YORK ( TheStreet) -- Second-quarter earnings, and economic data from China and the U.S. will be key triggers to stock rating changes during the second half. Concerns related to the pace of the global economic recovery and the offsetting effect of bargaining opportunities in metal stocks could keep recommendations relatively bullish for the remainder of 2010.Analysts have turned bullish on the metal stocks, especially copper, during the past six months. During the first quarter, a boost in demand for base metals on the global economic recovery pushed up metals prices, thereby increasing the profitability of the metal producers. During the second quarter, prices slumped on headwinds blowing from the eurozone and from monetary tightening in China. Despite subsequent selloffs, analysts reckon fundamentals remain positive and metal stocks offer attractive bargaining opportunities. Copper Stocks Over the past six months, analysts have been more bullish on Southern Copper ( SCCO) than Freeport-McMoRan Copper & Gold ( FCX) and Teck Resources ( TCK). Analysts favored Southern Copper primarily because of its large reserve base. The capital expenditure plan, defined earlier this year, provided Southern Copper the opportunity to expand production over 2009. Based on the positive demand trends for copper during the first quarter, analysts expected Southern Copper to report higher revenue than Freeport and Teck Resources. Hence, Southern Copper received higher upgrades than the other two copper majors. In addition, Southern Copper has a lower cash cost profile for new projects vis-a-vis industry peers. Analysts turned bullish on copper stocks during the first quarter of 2010, buoyed by the positive sentiment in global markets. Despite copper for spot delivery on the London Metal Exchange correcting 12% during the second quarter, analysts continue to be bullish on stocks as they reckon the stock price corrections are overdone. During the second half, the biggest triggers for a downside rating change for copper stocks could be major decline in China copper imports and consumption, and U.S. housing data. Aluminum Stocks An interesting upgrade in analyst recommendations was observed for aluminum stocks. Alcoa ( AA) received upgrades only during the first quarter, while ratings remained unchanged during the second quarter.
Ratings for Kaiser Aluminum ( KALU) and Alumina ( AWC) remained unchanged during the first quarter, but received upgrades during the second quarter. Competitive positioning of companies rather than the metal's fundamental outlook seemed to influence ratings. Alcoa's weak first-quarter results triggered downgrades on the stock. Anticipating Alcoa to continue underperforming on the company's higher production costs, analysts focused on Kaiser and Alumina during the second quarter. During the second quarter, aluminum for spot delivery on LME declined 7.5% and could decline further during the second half on concerns related to global economy. Big Three Mining Giants Of the three mining giants, Vale ( VALE) has emerged a clear favorite with analysts over BHP Billiton ( BHP) and Rio Tinto ( RTP). For instance, on upgrading Vale to buy from neutral, analysts at UBS noted a compelling risk-reward profile for the company and reckoned undue corrections in the stock. Seaborne iron ore prices surged 90% during the second quarter and could rise further during the third quarter. Escalating iron ore prices benefited Vale as iron ore accounts for a higher proportion (60%) of Vale's revenue in comparison to BHP and Rio. Further, overall ratings for BHP and Rio remained unchanged during the past three months due to concerns related to Australia's "super" profit tax. Current mining tax reforms from the Gillard administration will likely lead to upgrades in BHP and Rio stocks during the third quarter.