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UPDATE 2-AutoNation profit rises as Mercedes sales jump

* Shares rise as much as 6.4 percent

* Jackson warns of high inventories

* Analyst says slow January sales will pressure auto dealer groups

Jan 30 (Reuters) - AutoNation Inc, the largest U.S. automobile dealer group, sped by Wall Street's quarterly earnings expectations on robust sales of luxury cars like Mercedes-Benz and BMW, and its shares rose as high as 6.4 percent.

AutoNation said on Thursday that its fourth-quarter income from what it calls new premium-luxury vehicles increased 28 percent to $102.7 million. The segment accounted for 46 percent of total new-vehicle income.

"The shining star really's got to be Mercedes-Benz for introducing two new products simultaneously at different ends of the spectrum with the CLA and the S-Class," AutoNation Chief Operating Officer Mike Maroone said in a telephone interview. "Demand for those products was extraordinary."

The CLA is an entry-level vehicle costing about $30,000, and the S-Class sedan is the flagship of Daimler AG's Mercedes-Benz brand. The average purchase price for an S-Class sedan is $94,000, according to TrueCar.com.

Mercedes-Benz vehicles accounted for 10 percent of AutoNation's new-vehicle sales in the quarter, and BMW accounted for 5.6 percent. They were followed by Toyota Motor Corp's namesake brand at 18.6 percent; Ford Motor Co , 16.5 percent; Honda Motor Co's namesake brand, 11 percent; and Nissan Motor Co's namesake brand, 10 percent.

AutoNation's net income rose to $109.4 million, or 89 cents per share, in the quarter from $83.2 million, or 67 cents per share, a year earlier.

Excluding a tax benefit and gains from changes in owning property, earnings of 83 cents per share beat analysts' expectations of 76 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 8 percent to $4.52 billion, but missed analysts' expectations of $4.59 billion.

Shares of Fort Lauderdale, Florida-based AutoNation were up 5 percent at $49.38 on Thursday morning after rising as high as $50.02.

Morgan Stanley analyst Ravi Shanker said a higher-than-expected margin of 4.5 percent was a key reason that the stock rose.

WARNING AUTOMAKERS AGAIN

AutoNation Chief Executive Officer Mike Jackson, who used to run the Mercedes-Benz brand for Daimler in the United States, has been warning for several months that high inventories could bite into profits for automakers and dealer groups. He did so again in a telephone interview on Thursday.

"I'm overall very optimistic, very positive," said Jackson. "I'm just observing that taking inventories to these levels is an inefficiency that we should really focus on this year and bring it back in line."

Some vehicle dealers and auto company executives as well as most industry analysts are worried that inventories will rise beyond demand this year. That is because auto plants have returned to full production and have been churning out cars and trucks at a greater clip than just after the 2008-2010 downturn in U.S. sales.

Jackson said he feared that automakers, particularly those targeting the mass market, would produce too many vehicles, which could cause them to offer heavy consumer incentives to move product on dealer lots.

Jeff Schuster, senior vice president of forecasting at LMC Automotive, said that while there should be concern, he was confident that automakers will be disciplined on incentives, which they generally have been since the 2008-2010 downturn in the U.S. new-vehicle business.

"Even if we have a weather-induced slowdown from January, which I think we will have, I don't think over-inventory is going to plague the auto industry this year," Schuster said.

But Buckingham Research analyst Joseph Amaturo said slow January sales would put pressure on corporate auto dealer groups, of which AutoNation is the largest by a wide margin.

Automakers will report their U.S. sales for January on Monday.

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