American Greetings Corporation (NYSE: AM) 's announcement that it will acquire bankrupt competitor Recycled Paper Greetings is running into some fierce resistance from a major investor in Recycled Paper.

RPG Investment Holdings LLC and Monitor Clipper Partners voiced their opposition with RPGI director and Monitor Clipper partner Travis Metz saying that "Through its unlawful actions, we believe American Greetings is attempting to eliminate Recycled Paper Greetings as a competitor, in an effort to gain more widespread traction in the lucrative market segment in which Recycled Paper Greetings excels."

Doesn't "excel" seem like a pretty strong word for a company that filed for bankruptcy? The press release levels some pretty serious allegations: "RPGI has taken several actions to combat AG's unlawful activities, including pursuing litigation in the U.S. District Court in Chicago which is ongoing. This litigation revolves around AG's unlawful purchase of a majority interest in RPG's senior debt, in direct violation of a contractual obligation not to do so."

The investors said they believe that the interests of creditors, shareholders, employees and customers would be better served if Recycled Paper were allowed to pursue a restructuring as a stand-alone company.

There's not a whole lot on the economic calendar this coming week, as Thursday is Christmas day. But things are not entirely silent either.

As this is Christmas card season, it's somehow appropriate that American Greetings Corp. (NYSE: AM) is scheduled to report fiscal third-quarter results. Analysts surveyed by Thomson Reuters expect the nation's number two producer of greeting cards to report earnings of $0.52 per share, essentially the same as a year ago. Estimated revenue for the quarter is $474.5 million, down 2.3% from a year ago. American Greetings missed analysts' estimates in three of the past four quarters -- by 55.4% in the first quarter. After falling to a multiyear low of $7.85 per share in late November, the price closed Friday at $9.92. But the share price is 53.8% lower than a year ago.

Drugstore chain Walgreen Co. (NYSE: WAG), where one may find American Greetings cards, is expected to also report earnings the same as a year ago, or $0.46 per share, on revenue of $15.1 billion (+7.5%). Walgreen reported a modest increase in sales in October and again in November. The company only missed profit estimates in one of the past four quarters, and that by only a penny. The consensus recommendation remains to buy WAG, which has a long-term EPS growth rate forecast of 12.5%, better than the S&P 500 but less than that of rival CVS Caremark Corp. (NYSE: CVS). Walgreen's share price has been creeping upward since reaching a multiyear low of $21.28 in October and closed Friday at $26.08. (For more on Walgreen, see Steven Mallas's earnings preview.)

Earnings reports continue to dribble in as the quarter winds down. Much of the attention this week will be on homebuilders KB Home (NYSE: KBH) and Lennar Corp. (NYSE: LEN) as investors look for any sign that the housing sector has bottomed (home sales numbers are also due out this week; see below). Analysts surveyed by Thomson Financial anticipate that both companies will report that they narrowed their losses in the most recent quarter.

KB Home's expected $1.25 per share loss, on revenue of $725.5 million, compares to the previous quarter loss of $3.30 and to a year-ago loss of $6.19. However, KB Home's losses in the past few quarters have been deeper than expected. The Los Angeles-based homebuilder's long-range earnings growth forecast is 10.5%, less than the S&P 500. Analysts continue to recommend holding KB Home, and have for at least 120 days. Shares, however, reached a new 52-week high of $31.69 on Friday, and they are up 10.5% year to date.

Lennar is expected to post a loss of 52 cents per share, on revenue of $1.1 billion. That compares to the previous quarter's per-share loss of 76 cents and to a year-ago loss of $3.25. While Lennar also has tended in the past few quarters to miss expectations, the Miami-based company managed a positive surprise in the first quarter of 2008. Lennar's long-range earnings growth forecast is 10.3%, about the same as KB Home's. Analysts also recommend holding Lennar. Friday, shares of Lennar also reached a 52-week high, $27.75, but they are down 6.4% year to date.

American Greetings (NYSE: AM) knows how to deal with changing times. After all, the company got its start in 1906.

In fact, the company was an early adopter of dot-com technologies (going back about 13 years), and has purchased a variety of digital companies, such as BlueMountain.com.

And yes, American Greetings is also making moves on the social networking front through its popular Kiwee.com destination. In its first six months out of beta, the site has attracted more than 1 million members. A key has been its IM Toolbar, which allows for cool digital icons and expressions for messaging platforms like Microsoft (NASDAQ: MSFT), Yahoo! (NASDAQ: YHOO), and Time Warner (NYSE: TWX)'s AOL.

However, Kiwee is not a social networking site. "There are already strong players in social networking, such as MySpace and Facebook," said Rajiv Jain, the SVP and general manager of Kiwee, in an interview with me Wednesday. "Instead, we focus on our core strength, which is creating great content."

No doubt, the content is pretty cool. Most importantly, there are a variety of tools to allow for customization, letting users easily create unique online personalities.

So far, it seems the formula is getting traction -- and shows that old companies can still find ways to innovate.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

A piece in today's New York Times looks at the ways that American Greetings (NYSE: AM) and Hallmark are trying to compete with online alternatives for consumer greeting dollars. American Greetings is betting that people will respond more to everyday humor, and has signed Ellen DeGeneres to create a line of Ellen cards to appeal to the women who purchase 80% of greeting cards. Hallmark has the Shoebox series, and is increasingly focusing on current events humor.

According to the piece, "While the paper card market is declining, it is still five times as large as the e-card market, according to the Greeting Card Association, a trade group... newer forms of communication - not just e-mail, but also social networks and chat boards - do seem to threaten its relevance."

Are greeting card companies a good investment? My hunch is no. The only major publicly traded option is American Greetings, whose net income has declined in each of the past 5 years, and sales are also trending down. Nearly all college-age kids have Facebook or Myspace pages and, while an online wedding card might be frowned upon by older folks, it seems likely that the next generation will feel differently. I would argue that it's entirely possible that, in 25 years, the greeting card industry will be pretty much gone. Without any catalyst for short-term growth, the stock looks expensive.

The company lists this as a risk factor in its most recent 10-K: The growth of our greeting card business is critical to future profitability and cash flow. But that seems hardly assured, and I would argue downright unlikely.

Did you know that the creator of Care Bears also invented the Strawberry Shortcake and Holly Hobbie characters? No? It's true. In fact, it's a Cleveland-based outfit that has been selling greeting cards for 101 years.

American Greetings Corporation (NYSE: AM) designs, manufactures and sells greeting cards and other social expression products. It offers everyday and seasonal cards, gift wrap, party goods, stationery and giftware. It also distributes greetings over the Internet. The company operates about 500 retail outlets in North America and its products are sold in some 125,000 retail stores worldwide. Target Corp. (NYSE: TGT) and CVS Caremark (NYSE: CVS) are major retail customers.

Investors were pleased last week, when the company reported Q1 EPS of 55 cents and revenues of $418 million. Analysts had been looking for 34 cents and $393.9 million. Management also guided FY08 EPS to $1.35-$1.55, versus Street consensus of $1.35. The stock popped through 30-day and 50-day moving average resistance on the news and has since begun to consolidate the gain in a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers currently recommend the issue with three "holds." Analysts see a 19% growth rate, through the next year. The AM P/E ratio (19.28), Price to Sales ratio (0.87), Price to Book ratio (1.48) and EPS Growth rate (139.13%) compare favorably with industry, sector and S&P 500 averages. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $20.65 and $29.00. A stop-loss of $24.20 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

Multi-hyphenate Ellen DeGeneres has already proven herself a successful sitcom star, talk show (and Oscar!) hostess and gay-rights activist. The likable and tireless comedian is now ready for her next project -- sharing her witty observations with the masses through a line of greeting cards. Ms. DeGeneres has inked a deal with American Greetings (NYSE: AM) to design a line of 32 cards, which are slated to appear in stores this summer. A spokesperson with AM said the company is trying to sharpen its focus on humorous cards.

Always ready with a wry quip, DeGeneres noted that "I look at having a line of cards as another extension of being a host; helping you wish your loved ones well, piggybacking on your birthday greetings . . . doing it this way is much easier than crashing parties," she joked.

AM is currently in second place among greeting-card retailers, trailing privately held Hallmark. The stock has dropped more than 1% today, March 26th, as it continues to fight with technical resistance in the form of its overhead 10-week moving average.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.