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Source: Walgreen Company

Walgreen Company (NASDAQ:WBA) operates more than 8,300 locations across America, making it the nation's largest pharmacy store operator and positioning it perfectly to take advantage of rising prescription demand tied to ageing baby boomers and healthcare reform.

Those boomers and newly insured customers helped Walgreen's sales grow 6.2% during its just completed fiscal fourth quarter, bringing Walgreen's full fiscal year sales growth to 5.8%. Since business at the pharmacy operator continues to climb, let's look more closely at its fiscal fourth quarter.

Rising revenue
Walgreen operated 91 more stores in the fourth quarter than it did a year ago, but that wasn't the only reason behind the company's sales growth. Comparable store sales, which measure sales at stores open at least one year, also grew, climbing 5.4%.

That growth came mostly from rising prescription volume. Prescription sales, which make up roughly two-thirds of Walgreen's revenue, jumped 9.3% year over year in the quarter as comparable store prescription volume grew 3.9%.

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Source: Walgreen Company

Overall, Walgreen filled a record 856 million prescriptions during the past year, thanks in large part to rising Medicare Part D enrollment by baby boomers. In the fourth quarter, the company filled 9.2% more Medicare Part D prescriptions than it did a year ago.

Translating into earnings
Rite Aid
(NYSE:RAD), the country's third-largest pharmacy retailer, reported disappointing quarterly results in September because of falling reimbursement and rising generic drug prices and Walgreen's results were similarly held back by those headwinds.

However, Walgreen was able to offset lower reimbursement and generic drug price inflation by leveraging its larger buying power following its joint venture with Alliance Boots, a major U.K. pharmacy operator that Walgreen has agreed to acquire.

Cost savings tied to the Alliance Boots joint venture totaled $491 million during the past year and added $0.06 to Walgreen's adjusted earnings per share last quarter. As a result, despite hurdles, Walgreen reported its gross profit dollars increased by $136 million, or 2.6%, during the fourth quarter versus a year ago.

After adjusting to back out a $0.90 loss in the quarter tied to its Alliance Boots acquisition, Walgreen's earnings per share grew 1.4% from a year ago to $0.74. That brought the company's adjusted earnings per share for the full year to $3.28, up 5.1% from the $3.12 it earned a year ago.

Cashing in on growth
Walgreen's 19% pharmacy retail market share makes it a Goliath in the prescription business, but it also means that the company kicks off substantial shareholder friendly cash.

During the fiscal fourth quarter, Walgreen's free cash flow totaled $1.1 billion and its operating cash flow totaled $1.4 billion.

That cash helped the company return $1.28 in dividends to investors during the fiscal year, up from $1.14 a year ago, and increase its quarterly dividend payment by another 7.1% to $0.3375 in August, marking the company's 39th consecutive year of dividend growth.

But even after increasing its dividend, Walgreen still has plenty of firepower thanks to an improving balance sheet. Its cash hoard finished the quarter at $2.65 billion, up from $2.1 billion last year, and its long-term debt fell to $3.73 billion from $4.48 billion a year ago.

Better times ahead
Walgreen estimates that cost savings tied to its Alliance Boots acquisition will reach $650 million in 2015 and that the deal will boost its fiscal first quarter earnings by between $0.10 and $0.11 per share. But it won't have to rely just on growing its global pharmacy footprint for future growth.

Walgreen is aggressively growing its in-store healthcare clinic business, too. That business should help it capture more revenue opportunities as it wins patients away from expensive emergency rooms and inconvenient primary care doctors. Clinics should also benefit as newly insured patients under healthcare reform seek out care from everything from sprains to the flu and seniors embrace Walgreen's chronic care programs.

Overall, it's hard to find a lot to dislike about the Walgreen's quarter outside of the well-known reimbursement headwind. While investors will want to keep an eye on the quarterly margin, taking a long-term view may be wise given the potential benefit of rising script demand from boomers and the newly insured.

Todd Campbell is long Rite Aid. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.