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Due a deadlock with Express Scripts (NASDAQ:ESRX), Walgreen (NYSE:WAG) earnings tumbled during the second quarter. The good news is they beat analyst forecasts; the bad news is their prescription orders took a nose dive. The total number of prescriptions for Q2 was 196 million, down 4.2% from a year ago. Net sales came in descent; up about 1% to $18.7 billion which some would say needs to improve moving forward.

Walgreen is the largest chain of drugstores here in US, and posted Q2 earnings of $0.78/share which was a penny ahead of analysts, yet $0.02 lower than last year's Q2 earnings of $0.80. Walgreen CEO Greg Wasson said in a statement:

The front end of our stores continued to perform strongly and attract customers for their health and daily living needs. As we expected, the convenience and customer-focused selection of our front-end health and daily living products and services led to higher comparable store front-end sales in the quarter, despite reduced pharmacy volume.

If WAG wants to restore shareholder confidence it needs to hammer out a new contract with ESRX. They are losing considerable market share to both CVS Caremark (NYSE:CVS) and Rite Aid (NYSE:RAD), who have clearly gained more customers by accepting patients enrolled in the ESRX plan.

Investors should short WAG in the near term if a contract isn't hashed out soon. They will continue to lose much needed market share, and in turn continue to have disappointing quarters.

Source: Walgreen: The Express Scripts Saga Still Stings