Foolish Forecast: Hello, American Greetings

Wondering when greeting-card company American Greetings (NYSE: AM  ) will release its earnings tomorrow? In the A.M., of course. Here's what you need to know to put tomorrow morning's numbers in context.

What analysts say:

• Buy, Sell, or Waffle? Only four analysts follow American Greetings, and all of them rate the stock a hold.
• Revenues. Sales are actually expected to decline this quarter, down 2% to $483.7 million.
• Earnings. Profits are expected to fall even further, down 13% to $0.47 per share.

What management says:
Why doesn't Wall Street think you should sell this stock? Look at two recent press releases from American Greetings. The first reads, in relevant part: "American Greetings . has completed a $200 million share repurchase program. purchas[ing] 8.2 million Class A common shares for [an average of] $24.38." The second press release announces pay raises for American Greetings' CEO and COO, to $700,000 and $575,000, respectively.

What management does:
From a margin perspective, I don't see a whole lot of improvement in American Greetings' performance to justify the pay raises, management's confidence that the business is worth more than investors think, or Wall Street analysts' persistence in their hold ratings. Rolling gross, operating, and net margins have all fallen significantly over the last 18 months.

Margins %	8/04	11/04	2/05	5/05	8/05	11/05
Gross	54.9	54.8	53.1	53.6	54.1	53.9
Op.	11.1	10.6	6.2	6.5	6.8	5.9
Net	5.4	6.3	5	6.1	6	3.4

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

One Fool says:
Meanwhile, American Greetings' sales declined year over year in three of the last four quarters (rising only 2.2% in the sole "good" quarter). The stock's price continues to sink, underperforming the S&P 500 index by 24% over the past year.

So to sum up, the company is selling less, making less profit on what it does sell, its stock price is lagging, and management has spent $200 million of shareholders' money to buy back shares at 11% higher prices than those shares are worth today.

This deserves a pay raise?

Competitors:
With Hallmark privately owned, American Greetings' main publicly traded rival is CSS Industries (NYSE: CSS  ) .

Fool contributor Rich Smith does not own shares of any company named above.