Last week, fellow Fool Stephen Simpson was hoping that Walgreen's (NYSE:WAG) upcoming earnings report might contain a few pockets of weakness that would provoke a knee-jerk selling reaction. Wall Street's notorious myopia can lead it to wildly overreact to not-so-bad news, allowing value investors to scoop up promising stocks at bargain prices. Not this time, though.

After reporting fourth-quarter earnings that fell a couple cents short yesterday, Walgreen's shares indeed lost some ground. However, investors found no red flags that might induce any real panic selling. For the quarter, net income ticked up just 1.4% to $329 million -- the thinnest increase in six years. I'm usually quick to dismiss weather-related excuses, but in this case, Hurricane Katrina caused Walgreen some genuine headaches.

The company was forced to close 74 stores during the storm -- almost half of which are still dark -- and book a hefty $54.7 million charge. Excluding the impact of Katrina and a one-time litigation gain, earnings were up a much healthier 12% to $363.3 million, or $0.35 per share. For the year, earnings jumped 17.7% to $1.57 billion, while sales climbed 12.5% to $42.2 billion. Those figures represent the 31st consecutive year of record sales and profits.

Walgreen's industry-leading prescription sales have underpinned its recent growth. Last year, the company filled 490 million prescriptions, which generated revenues of roughly $27 billion -- a solid 13.4% increase. Prescriptions, which account for two-thirds of the company's total revenues, lifted overall same-store sales 7% for the quarter and 8.2% for the full year. By comparison, rival CVS (NYSE:CVS) posted a 5.1% gain in its most recent quarter, and struggling Rite Aid (NYSE:RAD) only managed a slim gain of 0.5% -- the latter composed entirely of front-end merchandise.

In last year's fourth quarter, Walgreen benefited from a LIFO inventory credit of $48.5 million. This year, the amount dropped to just $2 million, yet the company still managed to expand its gross margins by more than 20 basis points to 28%. Much of the credit goes to a favorable shift in the sales mix toward generic drugs. While generics are priced lower, they typically carry higher margins than their branded counterparts.

Walgreen's latest numbers came up a little short of the mark -- even after backing out the impact of Katrina -- but not enough to capture the attention of value hunters. Those waiting for a sharper pullback, though, may not find the shares overly cooperative. The chain is picking up share in a fragmented market and dominating its rivals in terms of revenues per store, squeezing more than $8 million annually from each location. The addition of 475 new stores next year will help drive solid top-line gains, and the current wave of generic drugs should continue to boost margins going forward. Walgreen also stands ready to benefit from Medicare changes scheduled to take effect within a few months.

Throw in an aggressive share repurchase program and seven decades of uninterrupted dividend increases, and it comes as little surprise that the stock seldom catches a severe cold.

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At the time of publication, Fool contributor Nathan Slaughter held no financial position in any of the companies mentioned.