I love going to the drugstore. Whether it's CVS (NYSE: CVS) or my neighborhood Walgreen (NYSE: WAG), I love the convenience of being able to buy everything I need and everything I don't need in one place. I buy lots of Entenmann's donuts, toothpaste, and school supplies at my local store. And now, I may be able to get a flu shot at the store as well.

The New York Times ran an article today entitled "Should Pharmacists Give Flu Shots?" It seems New York City has been suffering from increasingly bad flu seasons. To combat such breakouts, the city is now attempting to pass a bill allowing pharmacists to give flu and pneumonia shots.

The same article quoted the Department of Health as saying that influenza is "now widespread in New York City, with more than 1,000 flu-related visits to emergency rooms each day. Some 20 percent of the current flu vaccine supply is unused."

I feel my local drugstore is competent to sell me nail clippers and gum, but do we really want these stores dispensing medical services?

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

Even when the economy struggles, people still need medicine, diapers, personal-care products, and large boxes of candy. This explains the continued sales growth at Walgreen Co. (NYSE: WAG), which saw same-store sales in February jump 8.3%. Strong Valentine's Day sales and a particularly violent flu season helped boost demand at the pharmaceutical retailer.

Excluding the extra shopping day due to Leap Year, same-store sales were up 4.2%. Same-store sales in the chain's pharmacies rose 8.3% and climbed 4.1% excluding February 29. Sales from the pharmacy were modestly impacted by the transition of popular allergy medicine Zyrtec to an over-the-counter version. In turn, the appearance of Zyrtec on the regular shelves positively impacted general-merchandise (or front-end) sales, which rose 8.2% in February, or 4.6% excluding the extra shopping day.

The impact of these sales on the bottom line will be more apparent late this month; WAG is currently scheduled to report its quarterly earnings results on March 24. According to First Call estimates, Wall Street is expecting per-share results of 67 cents, or two pennies better than year-ago figures.

In late-morning trading, WAG shares have risen 0.8%. The shares have shown recent strength, tacking on nearly 13% since their late-January nadir.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.

CVS Caremark (NYSE: CVS) is no longer looking for new acquisitions, but rather will focus on assimilating recent acquisitions, Chairman and Chief Executive Thomas Ryan said on Wednesday. While speaking to the Reuters Health Summit in New York (check out the blog for the conference here), Ryan said, "It's most important that we stay focused on the integration, the execution and getting our balance sheet in order, and then we will have the opportunity to look at opportunistic acquisitions."

CVS acquired giant pharmacy benefits manager Caremark in March and continues to integrate recent drugstore chain purchases.

It sounds like the company has its hands full given the amount of M&A work CVS has done over the past couple of years combined with the organic growth the firm is seeing. While fierce competitor, Walgreen (NYSE: WAG), is considering applying the brakes in terms of opening up new doors, CVS is in full-throttle mode right now.

Continuing with our defensive stock series.... With the markets in a choppy /consolidation mode (or perhaps worse), the drug store chain sector has appeal as a defensive strategy, and CVS Caremark (NYSE: CVS) is a superior performer in the aforementioned sector.

CVS has used acquisition (1,100 Eckerd drugs stores acquired in 2004, 700 Albertson's drugs stores acquired in 2006) and a super-rigorous, systematic store opening plan to create the drug store world's equivalent of a lien, mean, fighting machine: more than 6,200 stores in 43 states.

CVS has the resources, economies of scale, and, arguably, most importantly, the store site selection experience to continue to drive impressive revenue/EPS gains. Further, recent improvements in inventory processes and cost management support the above, and the acquisition of Caremark should add new clients/customers. True, back-store (pharmacy) margins may be pressured by generic competitors, but the front-store (everything else) should make up for it in 2007-2009. CVS's shares closed Tuesday up 39 cents to $40.11.

Continuing with our defensive stock series, with the markets in a choppy/consolidation mode (or perhaps worse), the drug store chain sector has appeal as a defensive strategy. Typically, Walgreen (NYSE: WAG) would fit the bill, but recent results have generated caution signals, and a Don't Buy, pending additional performance statistics.

On Oct. 1, Walgreen reported Q4 EPS of 40 cents, down from 41 cents Q4 a year ago, and 7 cents below the consensus estimate. Wall Street did not respond favorably, taking shares down more than 16% to about $40 from $48 that day. The shares have since deteriorated further, and closed around $38.25 Tuesday.

Prior to this quarter, Walgreen had recorded double-digit earnings growth in six of the last seven quarters, and many analysts had seen F2008 revenue advancing about 10%, including a 5% front store revenue gain. Nevertheless, those projections could not prevent the stock from incurring a large hit -- a sell-off symptomatic of today's market. Miss an EPS consensus estimate in a normal market, and the stock drops 5%. Miss an EPS consensus estimate in the current skittish market, and the Street takes your stock down 10%, or more. Did Wall Street's response constitute an overreaction? Probably.

That last point was reinforced on Monday when Morgan Stanley analyst Mark Wiltamuth raised his rating on the drug store chain to "Overweight," or "Buy," from "Equal-Weight," with a $45 target, arguing the notion that generics will cut deeply into 6,000-store WAG's margins has been overplayed.

[Note: Technical analysis agnostics stop reading here; all others continue.]

Still, technically Walgreen's stock is struggling with near three-year support levels around $38. If WAG fails to hold that support, a drop to the next major support level, $30, is possible. Further, the stock is now substantially below both the 50-day and the 200-day moving averages -- two indicators of stock strength/weakness.

Stock Analysis: Walgreen is a moderate-risk stock not suitable for low-risk investors. Further, the prudent strategy with WAG is Don't Buy, and wait to see if the stock can both hold the $38 support level, and close back above $43 in the quarter ahead. We'll re-evaluate WAG at that time.