The shares of Walgreen Company (NYSE:WAG) are trading higher despite reporting disappointing financial results for its fiscal second quarter. The stock price of the company was up more than 3% to $66.38 per share around 11:45 in the morning in New York on Tuesday.

Walgreen

Walgreen financial results

Walgreen Company (NYSE:WAG) posted $754 million GAAP net earnings or $0.78 per diluted share for the second quarter. Its earnings were down from $756 million or $0.79 diluted earnings per share in the same period a year earlier.

The largest pharmacy chain operator in the United said its adjusted earnings were $880 million or $0.91 per diluted share, compared with $915 million or $0.96 per diluted share in the same quarter a year ago.  Wall Street analysts estimated that Walgreen Company (NYSE:WAG) will be able to deliver $0.93 adjusted earnings per share.

“Our second quarter performance, in spite of expected headwinds from slower generic drug introductions, comparisons with last year’s flu season and severe weather, was marked by solid top-line growth driven by record quarterly sales and record second-quarter prescriptions filled. We also continued to gain prescription market share while we maintained a firm hold on our costs,” said Greg Wasson, president and CEO of Walgreen Company (NYSE:WAG) in a statement.

The pharmacy chain operator said its sales for the second quarter increased 5.1 percent to $19.6 billion and its front-end comparable sales rose 2%.

Walgreen Company (NYSE:WAG) said its prescription sales increased 7% while prescription sales in comparable stores rose 5.8%. Prescription sales account for 62.2% of the company’s sales in the quarter. The company said its retail prescription market share gained 20 basis points based in the report of IMS Health on a 30-day adjusted basis.

The company ended the quarter with $877 million free cash flow and $1.1 billion operating cash flow.

Joint synergy program with Alliance Boots

According to Wasson, Walgreen Company (NYSE:WAG) have almost 80 million active members in its Balance Rewards loyalty program. He also expects the generic drug headwind that affected the company in the first half to ease and turnaround by the end of the year.

Wasson added that the company’s joint synergy program with Alliance Boots is expected to exceed second-year estimates. The combined synergies of Walgreen Company (NYSE:WAG) and Alliance Boots in the first half of 2014 were around $236 million. The company projected that the joint synergy program for the second year will be in the range of $375 million to $425 million.

Drugstore closures

Walgreen Company (NYSE:WAG) said it will close 76 drugstores during the second half of this year as part of its effort to optimize its asset base. Despite the closures, the company still expects a net increase in stores of approximately 55 to 75 locations.

Wasson said, “While we seize the opportunity for store growth as the population ages and consumers look to community pharmacy for their health care needs, we also continue to focus on optimizing our assets and organization to position Walgreens for our future as a global company.”

Walgreen Company (NYSE:WAG) estimated that its store optimization will result in annual operating income (EBIT) benefit of $40 million to $50 million early in fiscal 2015. That represents a benefit of around $0.02 to $0.03 adjusted earnings per diluted share in fiscal 2015.