This week's biggest movers from the list of stocks we cover include WAG, EMR, CSCO, HOLX, UPS.

*Performance numbers reflect weekly performance.

Walgreen Company (WAG) -2.74%

WAG fell after saying that same-store sales declined 1.1% last month as the company introduced more generic drugs and a lower incidence of flu affected sales.  Investor’s negative reaction to generic sales doesn’t make much since generic can be twice as profitable for pharmacies as branded products. 

Drug stores pay as much as 90% less for generic drugs than for the branded equivalent, but they don’t reduce prices to customers and third-party payers (insurance companies) by as much, which adds to profits.  Obviously sales won’t rise as fast because generics are cheaper than branded products.  However, some analysts are predicting profits to rise as much as 20% starting next year as branded drugs with more than $100 billion in sales become available as generics.

WAG’s EPS was boosted by 19% the last time a large wave of patent expirations came in 2006 and 2007 – branded drugs with over $40 billion in sales lost patent protection.  With even more branded drugs losing patent protection and increased pricing power from expansion over the past few years, WAG is in solid position to take advantage of the generics trend.

The other reason investors might have been so disappointed in the same-store sales is that WAG is undergoing an extensive revamping of its stores that is suppose to increase sales.  The initiative places more emphasis on merchandising and customer experience with the goal of getting customers to add one more item to their basket per visit.  Personally, I think the recent decision to carry beer and liquor at their stores will have the biggest impact on top and bottom line performance.

Emerson Electric (EMR) +3.61%

EMR’s earnings crushed expectations thanks to strong margin performance from the climate, network power, and appliances business.  The diversified manufacturer saw sequential improvement across all of its business segments, suggesting the worst of the recession is likely past.  It’s great to see that the considerable time and money spent restructuring operations throughout the recession is bearing fruit (in the form of increased margins).  Investors continue to be impressed by EMR’s ability to weather the storm and make necessary investments to exit the recession stronger than before.

Cisco (CSCO) +1.23%

CSCO reported very strong quarterly results, with revenue up 8% and operating income growth of 34%.  Broad-based improvement across customer, product, and geographic markets was a very welcome sight after the previous quarter’s results were driven by extraordinary, non-sustainable growth in the public sector.   The sizeable revenue forecast of 23% to 26% in the fiscal third quarter juiced investors even more.

CSCO is just beginning to see results from its computer storage and server virtualization venture – a move to diversify businesses during the downturn that sparked new rivalries with companies that were previously partners in the same arena.  CSCO expects these businesses to re-energize growth in coming years.  Data networking equipment for any short period is a discretionary expense and thus will decline faster than IT budgets when the overall spending contracts and expand more quickly as the economy stabilizes.

Hologic (HOLX) +0.92%

HOLX’s earnings surprised to the upside and the raised its full-year revenue and profit forecast.  The shares were boosted further by analyst upgrades that cited conservative company guidance as well as the HOLX’s plans to develop a low-cost (less than $100,000) digital mammography system for emerging markets over the next few years.

Quarterly profit dropped 32% (less than expected) as the diagnostic-technology company again posted lower sales of its breast cancer detection product Selenia.  There have been signs, however, that U.S. hospital spending on capital equipment is stabilizing.  CEO Rob Cascella said the company’s order rate for digital mammography showed early signs of stabilization, but said there was still uncertainty in the capital equipment market.

United Parcel Service (UPS) -0.57%

UPS, viewed as a barometer for global trade activity, reported nice earnings as much improved margins offset set weak revenues in the U.S.   The company warned that the first quarter would be the most challenging of the year, with profitability to be only slightly better than last year.  Operating margin surged to 10.2% from 6.3% as average daily volume was flat at 17.3 million packages.  International revenue rose 5.8% as average daily volume climbed 12% and profit increased 28%. 

I found the CEO’s remarks on the long-term decline in package weights particularly interesting.  Also notable was the company’s first dividend increase in two years.

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Peter Lazaroff, Investment Analyst