The Deerfield, Illinois, company's shares slid almost 2 percent about an hour before markets opened and after it announced results Tuesday morning.
Walgreen said an increase in foreign income helped knock its tax rate down to 31.5 percent, compared with 38.7 percent last year. As a result, the company's income tax provision dropped $43 million in the quarter.
The lower tax rate contributed a benefit of about 8 cents per share toward the company's earnings, Cantor Fitzgerald analyst Ajay Jain said in a research note that described Walgreen's earnings as weak.
Walgreen Co. earned $722 million, or 75 cents per share, in the quarter that ended May 31, up from $624 million, or 65 cents per share, a year ago.
Adjusted earnings excluding one-time items totaled 91 cents per share. Analysts surveyed by FactSet expected 93 cents per share.
The drugstore chain's revenue climbed 6 percent to $19.4 billion. Analysts forecast $19.44 billion in revenue.
Walgreen also said Tuesday it is considering the second step in its combination with Swiss health and beauty retailer Alliance Boots, and it will hold an investor call later this summer to discuss that. The U.S. company acquired a 45 percent stake in Alliance Boots in 2012 and has an option to buy the rest of the company, which runs the largest drugstore chain in the United Kingdom.
Jain said Walgreen also may discuss a possible inversion with the Swiss company during its call later this summer.
Several large U.S. companies have used mergers recently to reincorporate overseas in countries with lower tax rates or pushed for such a move. The drugmaker Pfizer recently tried unsuccessfully to acquire U.K.-based AstraZeneca PLC.
Earlier this month, U.S. medical device manufacturer Medtronic Inc. said that it agreed to buy Ireland-based competitor Covidien for $42.9 billion in cash and stock. The combined company would have its executive offices in Dublin.
Ireland taxes corporate income at 12.5 percent. That compares to rates of well over 30 percent in the United States.
Walgreen operates 8,217 drugstores, or more than competitors CVS-Caremark Corp. and Rite Aid Corp.
Its shares were down $1.36, or 1.8 percent, to $72.37 in premarket trading.