As far as I know, American Greetings (NYSE:AM) doesn't make a greeting card to congratulate executives for great earnings. But the market's response was reward enough -- the stock's price pushed up by more than $2 by mid-morning. However, the key question now is whether the company can keep the good vibes alive.

Profits from continuing operations were $0.16 a share, reversing a $0.22 loss from a year ago. But revenues rose only 1.6%, to $377.4 million. So it may not have been a blockbuster quarter -- but don't forget that the second half is more important and that the company had fewer stores and got rid of its lower-margin items, such as its candle products.

Moreover, Fools will be pleased that expenses were kept under control. Operating expenses, which include labor, selling, marketing, and general and administrative expenses, fell $17.6 million from last year. The reduction reflects management's commitment to keep costs down. Closing underperforming stores has helped, as did streamlining operations.

The company is a fan of buybacks, which have reduced its diluted share count by one-third since early 2005. During the quarter, American Greetings repurchased 300,000 shares for around $7 million. In addition to buyback activity, the company will pay its regular quarterly dividend of $0.10 per share, which reflects a 25% boost back in April. And the company isn't going into hock to get the payouts to its investors. It has actually repaid about $40 million in debt since the start of the year, and the company's debt to total capital stands at a very reasonable 17.5%.

Several initiatives slated for the second half will be aimed at improving the core greeting-card business, whose products are sold at places such as Walgreen (NYSE:WAG) and Target (NYSE:TGT). It's a good time to focus on this area, because we're entering a key period for the company, with the fall and winter holiday seasons nearly upon us. Halloween cards, for starters, have been out since August.

Management, in reaffirming its $1.35- to $1.55-per-share earnings guidance for the year, certainly thinks it will meet its goals,. Will its words prove prophetic? I'd bet on the answer being yes. American Greetings is clearly a work in progress, but I like what I've seen so far.

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Fool contributor Larry Rothman is happy to receive greeting cards or other feedback, and he promises to read it when he's not being wrestled by his three children. Feel free to e-mail him at rothmanviews@comcast.net. He doesn't have any positions in the companies mentioned.