Earnings Estimates: Yardeni Asks "What Are Analysts Smoking"?

Earnings estimates keep rising and rising. What is everyone smoking?

A Tweet to a Linked-In article by Edward Yardeni caught my eye. Yardeni asks What Are Stock Industry Analysts Smoking?

I would like to try some of whatever industry analysts are smoking. You can compare my earnings forecasts to their consensus estimates on a weekly basis in YRI S&P 500 Earnings Forecast on our website. I say “tomato.” They say “tomahto.”

My earnings-per-share estimate for 2018 is $155.00 (up 17.4% y/y). The analysts continue to up the ante and are currently at $160.40 (up 21.5%). My estimate for 2019 is $166.00 (up 7.1%). Theirs is $175.72 (up 9.6%). Perhaps the analysts are just high on life.

Their growth estimate for next year seems too high to me since I expect 2019 earnings growth to settle back down to the historical trend of 7%.

Are They All High on Life?

Yardeni says "You can drive a truck between my earnings estimates and theirs."

Yet he still suggests "the stock market is likely to be at new record highs by the end of this year," even with his earnings estimate.

What Can Possibly Go Wrong?

I guess we can throw out a recession, earnings reviersion to the mean, a global slowdown, a valuation scare, or simply a valuation reversion to the mean.

Asset Bubble Poised to Break

1. Note that it has taken about $1 trillion in buybacks and dividends just to hold the the S&P 500 barely above breakeven on the year.
2. Crescat Capital notes Fed Tightening Cycles Coincide With Bursting of Asset Bubbles.

Yardeni is still looking up.

Mirror Mirror on the Wall

When asking what others are smoking, perhaps one should look into a mirror to see if they are smoking essentially the same stuff, just less of it.