The surprising conclusion from top-down vs. bottom-up EPS analysis

Mid-week market update: Business Insider recently highlighted an earnings warning from Strategas Research Partners about possible earnings disappointment for the remainder of 2017 and early 2018. Expect a deceleration in EPS growth because of base effects:

A big part of Strategas' argument stems from the fact that the period against which current earnings are compared — the first half of 2016 — was notably weak. And that, in turn, pushed year-over-year growth to unsustainable levels.

As the chart below shows, Wall Street is not bracing for the decline. Its estimates are represented by the blue columns, which show continued profit expansion over the next two quarters. Strategas has other ideas. Adjusting for historical factors, the firm sees earnings growth declining over the period before being cut almost in half by the first quarter of 2018, as indicated by the red columns.

In addition, Strategas believes that sales growth appears "toppy".

On the other hand, Ed Yardeni has the completely opposite bullish view:

(1) S+P 500 forward revenues per share, which tends to be a weekly coincident indicator of actual earnings, continued its linear ascent into record-high territory through the week of August 10.

(2) S+P 500 forward operating earnings per share, which works well as a 52-week leading indicator of four-quarter-trailing operating earnings, has gone vertical since March 2016. It works great during economic expansions, but terribly during recessions. If there is no recession in sight, then the prediction of this indicator is that four-quarter-trailing earnings per share is heading from $126 currently (through Q2) to $140 over the next four quarters.

Yardeni's believes that there is little risk to stock prices, as long as forward 12-month EPS and revenues are rising.

What`s going on? How do investors reconcile the two contradictory conclusions of analysis of the same data set?

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