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Walgreen’s (WAG) is one of those rare companies that makes money in good times and in bad. Year after year, the company has delivered an amazing record of consistently rising profits. Today, the company reported earnings of 51 cents a share, which was decent although it was a penny below Wall Street’s expectations.

Despite missing Wall Street's estimates, the company's shares rose 13 cents to $44.50 in late morning trading on the New York Stock Exchange, where they have traded in a 52-week range of $40.98 to $49.01.

Mitchell Corwin, an analyst with Morningstar, said the flu strain was weaker this year, causing fewer doctor visits and pharmacy prescriptions. But while Walgreen sales were light, the company's margins held up, he said.

"Overall sales were slower, but I'm not as concerned because the company is gaining market share relative to its peers and generating strong earnings and strong cash flow," Corwin said.

Walgreen, which has more than 5,100 drugstores across the country, said it is on track to open about 475 new stores this year.

This is a fantastic company, but I’m not a big fan of the stock right now. I think it’s gotten a bit too rich. The stock’s P/E ratio (before today's earnings) is about 28 while CVS’ (CVS) is just 20. As good as Walgreen’s is, I don’t think it deserves a 40% premium to CVS. But if the P/E ratio got back down to 20, it would be a terrific buy.

Posted by edelfenbein at March 27, 2006 12:44 PM