NEW YORK (TheStreet) -- You can now relax if you were concerned Walgreen (WAG) , the largest drugstore chain in the U.S., is losing market share to Rite Aid (RAD)  , which reported better-than-expected third-quarter earnings results Monday. 

Walgreen reported fiscal first-quarter earnings Tuesday of $809 million, or 85 cents per share, compared with $695 million, or 72 cents per share, a year earlier. On an adjusted basis, earnings were 81 cents per share, topping analysts' estimates of 74 cents, according to Thomson Reuters. Revenue also beat analysts' estimates by $50 million, reaching $19.55 billion.

After an already dominant performance in 2014, Walgreen has started its new fiscal year, which ends August 2015, on a strong note. The company's shares are up 33% for the year to date compared to gains of 8.8% gain in the Dow Jones Industrial Average and the 12.7% gain in the S&P 500.

WAG Chart
WAG data by YCharts

Walgreen CEO Greg Wasson, who plans to leave the company at the end of the month, called the results a "solid performance" for both pharmacy and retail products. On his last conference call with analysts, Wasson said, "The best is yet to come."

This is because Walgreen is in the process of buying Swiss health and beauty company Alliance Boots. Walgreen already hold a 45% equity stake in the joint venture. Walgreen will own Alliance Boots in full when the deal is expected to close Dec. 31. 

According to Walgreen, during the quarter its pharmacy and retail business benefited from purchasing synergies with Alliance Boots. This helped offset gross profit weakness that was negatively affected by lower third-party reimbursement and generic drug price inflation. Walgreen also saw an increase in the number of brand-name drugs with generic versions compared to the same quarter a year ago. The company said its retail prescription market share reached 19% and continues to grow.

All told, with revenue climbing 6.7% year over year and same-store sales climbing 5.7% (compared with 5.4% jump in same-store sales for Rite Aid), Walgreen has enough momentum to send its stock higher in 2015. 

With the stock trading at around $77, Walgreen, which has a high analyst 12-month price target of $80 (6.6% premium), is not going to excite with breathtaking gains. But to the extent the company can continue to grow its retail market share while extracting value and cost synergies from Alliance Boots, earnings estimates will have to be raised in 2015, supporting a higher stock price.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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