CarMax

(KMX) - Get Report

raised its third-quarter earnings estimates Tuesday, saying sales of used cars have improved from the summer.

The Richmond, Va., car dealer expects to earn 17 cents or 18 cents a share in the quarter ending Nov. 30, up from previous guidance of 12 cents to 17 cents a share. The profit will include a gain of 1 cent a share from a receivables securitization. The Thomson First Call consensus for the quarter is 15 cents a share.

The stock rose $1.50, or 5.5%, to $27.27. Since being

profiled Aug. 26 on this Web site as a possible value play, CarMax shares have risen 43%. The

S&P 500

is up 7% over the same period.

CarMax upwardly revised its estimate for third-quarter used-car unit sales at comparable dealerships, predicting an improvement of 2% to 3% over last year, compared with its previous estimate of a decline of 2% to 8%.

"Used-car sales trends are stronger thus far this quarter than the performance we experienced this summer," the company said. "Generally we are seeing a typical autumn model-year-changeover period, with used-car prices falling in line with historical norms.

"We may yet see the wholesale market adjust even further than seasonally, helping remove any remaining imbalance in the price gap between used cars and new cars that may be left over from the spring and summer, but that has not yet occurred," CarMax said.

The company said margins continued to be pressured by seasonal declines in wholesale values and lower margins from a new financing initiative. The company is also paying higher-than-expected bonuses and seeing lower service margins.