Sales of the Import brands, comprising stores that sell vehicles manufactured primarily by Toyota Motor Corp. (TM), Honda Motor Co. (HMC) and Nissan Motor Co. (NSANY), went up 15% to 7,944 units. Meanwhile, sales of the Premium Luxurybrands, comprising stores that sell vehicles including Daimler AG's (DDAIF) Mercedes Benz, BMW and Toyota Lexus, inched up 5% to 2,973 units.

Last month, the light vehicle sales in the U.S. rose 17% to a seasonally adjusted annual rate of 12.3 million units, signaling a strong recovery in the industry. All the major automakers, except Toyota, posted double-digit gain in sales. The industry witnessed a rebound in demand for sports utility vehicles (SUVs) and pickups during the month, which had been stunted as the global crisis set in.                                                                                               

In the third quarter of 2010, AutoNation reported a 9% fall in net income to $58.5 million from $64.4 million in the year-ago period. However, on earnings per share basis, profit rose 8% to 39 cents from 36 cents in the third quarter of 2009 as the company had 149.6 million shares outstanding for the quarter ended on September 30, 2010, down from 179.2 million for the quarter ended on September 30, 2009. With this, the company missed the Zacks Consensus Estimate by 3 cents per share.

AutoNation is the largest automotive retailer in the U.S. and is about twice the size of its nearest competitor. As of September 30, 2010, the company owned and operated 251 new vehicle franchises from 206 dealerships located in major metropolitan markets in 15 states. Despite the improved results, we have recommended the shares of the company as Zacks #3 Rank (Hold) for the short term (1–3 months) as new vehicle sales continue to face highly competitive environment.