Corner drugstore Walgreen (NYSE:WAG) reports earnings for the quarter ending Aug. 31, 2011, on Tuesday before the market opens. A premium for convenience and low prices bodes well for the company when it reports operating results.

There can be no better way to evaluate management than to watch how it performs during crisis. In these challenging times, not all is bleak. Plenty of companies are doing well, including Nike (NYSE:NKE). Nike reported strong earnings results last week, and its shares soared on the news.

Not a bad result considering how crummy the market was last week. Consumers still are spending and while economic growth is anemic, dollars still are being spent. It is the strong and competent that are surviving and thriving in this environment. Put Walgreen in that category.

The company has exceeded Wall Street estimates in three of the past four quarters:

Helping to fuel that performance are high oil prices and cash-strapped consumers looking to save money any way they can. Walgreen is close to home with expanded food items for sale at low prices. Consumers can do all their shopping at Walgreen and skip that extra trip to the grocery store. That saves money on gas.

In the most recent quarter, Walgreen beat estimates by two cents per share. The estimate for the current quarter is for the company to make 55 cents per share. That is a penny per share higher than where estimates stood 90 days ago.

For the fiscal year also ending Aug. 31, the average Wall Street estimate is for Walgreen to make $2.62 per share. That number improves by 14% in the following year. At current prices, WAG shares trade for 13 times earnings.

With no stock unscathed in this highly correlated selloff, Walgreen shares are now only slightly higher than they were a year ago:

Walgreen is undervalued heading into its earnings report before the market opens Tuesday. Shares trade for just 13 times earnings that are expected to grow next year by 14%. The company also pays a dividend of more than 2% per year. A dividend is a bit irrelevant when trading earnings, but worth mentioning as dividend stocks have been attracting attention the more the market drops.

The risk, of course, is if earnings fail to meet expectations — and in my opinion, the risk here is low. The company’s business model is solid and management seems to have proven its mettle during the past year. With unemployment stubbornly high, the search for discounts will continue. Walgreen will benefit from such a trend.

In the middle of July, the company announced a $2 billion stock buyback. Since that announcement, shares have dropped by nearly 20%. That makes little sense. I expect a strong earnings report and affirmation of prior guidance and perhaps increased guidance. That news could lift the stock by 3% to 5% after it reports results.