United Parcel Service Inc. (UPS), the world's largest package delivery company, Thursday reported sharply higher quarterly net income, driven by higher volumes of U.S. and international package shipments.

The Atlanta-based company reported second-quarter profit of $986 million, or 88 cents a share, compared to a year-earlier profit of $818 million, or 72 cents a share. Total revenue jumped to $10.2 billion from $8.9 billion in the same period a year earlier.

UPS's earnings were just ahead of its most recent financial target of 82 cents to 87 cents a share. Revenue was in line with the $10 billion that analysts, on average, had forecast, according to Reuters Estimates.

"It's good news — the question is whether it's enough to push the stock higher because the stock's already at a premium valuation," said Donald Broughton, the transportation analyst with AG Edwards. "They're still losing market share, just not at as fast a rate as they were."

UPS forecast third-quarter earnings of 81 cents to 87 cents a share, in line with analyst expectations of 84 cents a share. The company also nudged up its target for annual per-share earnings to a rise of 18 percent to 20 percent, versus a previous forecast of 16 percent to 20 percent growth.

Shares of UPS slipped 4 cents to $73.78 on the New York Stock Exchange (search).

The improved results demonstrate the benefits that UPS has reaped from an increase in global trade and a rise in direct-to-consumer shipping from electronic commerce.

Competitive threats from FedEx Corp. (FDX) and the U.S. Postal Service (search) have kept the company's growth in check, however, leading some analysts to fret over the risk of market share losses.

Some of those concerns were highlighted last month, as FedEx spooked Wall Street with a disappointing profit forecast. FedEx blamed price competition with UPS and a drag from high fuel costs. UPS countered that same day with a statement that reiterated its financial targets.

Apparently betraying no signs of a price war, second-quarter results demonstrated strength in both the numbers of packages shipped and the amount of money earned from each package — two key statistics watched closely by investors.

"Our U.S. business is strong and we see great opportunities internationally," Chief Financial Officer Scott Davis said in a statement.

For the second quarter, total U.S. average domestic package volume growth was 3.2 percent. Average revenue per average U.S. domestic package grew 2.4 percent — just below FedEx's level of 3 percent in its most recently concluded quarter.

Once again, the fastest growth came from overseas, as UPS expands in Europe and Asia. Total international package volume — for packages that cross national borders — rose 18.2 percent.

"That has been the strongest area of growth for both UPS and FedEx, and should continue to be," transportation analyst Broughton said. "The fastest and most reliable rate of growth is not any one economy, it's the economy of world trade. And FedEx and UPS are the gatekeepers."

Bear Stearns analyst Edward Wolfe said UPS's international package volume was ahead of his expectations, while domestic package volume was below his target. He urged investors to be cautious on the stock, which he expected to end the year in a range of $70 to $75.

"Our sense is that while earnings remain strong, international package (growth) has about peaked," he wrote in a note to investors. "UPS continues to have its hands full in domestic package operations defending against faster growth FedEx and DHL and a rejuvenated USPS Priority Mail product."