There are three basic forces that drive earnings per share growth: revenue, profit margins, and share counts.
Fattening profit margins have enabled corporations to book record earnings despite weak sales growth.
Because sales have been weak, corporate managers have been reluctant to invest in business. Instead, they've been shoveling cash back to shareholders in the form of dividends and share buybacks.
Despite the falling share counts, the amount of earnings per share growth driven by buybacks has actually been relatively small.
The biggest driver of earnings growth in recent years has clearly been profit margin expansion.
David Kelly and his team at JP Morgan Asset Management illustrate this phenomenon with the gray bars in this chart, which comes from the firm's Q2Guide To The Markets.
JP Morgan Asset Management