United Parcel Service Inc. (UPS), the world's largest package delivery company, on Thursday posted a 7 percent increase in quarterly profit on rising international business.

The company, whose shares rose 2.4 percent in early trading, also said it should meet expectation for 2005 earnings per share growth and forecast its profit next year will rise as much as 16 percent as the global small business package business remains strong.

Ground package delivery volume rose 3.6 percent in the quarter, heartening FTN Midwest Research analyst Mark Davis.

"That's a clear indication that the renewed sales and marketing efforts by UPS in the middle market are clearly paying dividends," he said. "A key focus for a lot of investors right now is to see those ground volumes bounce back after some disappointing quarters."

Davis, who has a "buy" rating on the stock, also cited growth in key international markets like China and the expansion of domestic and international operating profit margins as positives.

Net income in the third quarter rose to $953 million, or 86 cents a share, compared with $890 million, or 78 cents a share, in the year-earlier quarter. Analysts were expecting 86 cents a share, according to Reuters Estimates.

Investors have worried about a possible slowdown in the U.S. economy. Since package delivery tracks closely to the health of the economy, UPS remains vulnerable to any negative economic effect of high oil prices, rising interest rates and disruptive terror attacks.

UPS shares have fallen 15 percent so far this year, underperforming the Standard & Poor's 500 index and the Dow Jones Transportation Average index, which have declined 1.3 percent and 3.5 percent, respectively.

Consolidated revenue rose almost 18 percent, to $10.55 billion from $8.95 billion last year. Analysts had expected $10.43 billion.

"We have tremendous momentum right now in the U.S. and around the world and we see it continuing," UPS Chief Executive Mike Eskew said in a statement.

In July, UPS forecast third-quarter earnings of 81 cents to 87 cents a share. It also nudged up its target for annual per-share earnings to the high-end of its earlier forecast of 16 percent to 20 percent growth.

On Thursday, UPS maintained its forecast for earnings per share growth this year of 18 percent to 20 percent from last year's $2.90 a share before one-time items, suggesting a range of $3.42 to $3.48.

It also expects an 11 percent to 16 percent increase in 2006 over this year's expected results.

Analysts were expecting a profit before one-time items of $3.47 a share in 2005 and $3.89 a share for 2006.

International package revenue in the third quarter rose 14.5 percent to $1.92 billion, doubling the pace of U.S. revenue growth. Package delivery volume into and out of Asia grew by 26 percent, and China volume rose 34 percent.

Revenue for the supply chain and freight segment jumped 130 percent to $1.6 billion due to the impact of the acquisition of both Menlo Worldwide Forwarding and Overnite.

Within the United States, where UPS has a dominant share of the package delivery market, package sales grew 6.9 percent to $7.03 billion. The company said pricing remained firm.

Investors have worried that UPS faced the possibility of losing out to rivals FedEx Corp. (FDX), DHL and the U.S. Postal Service.

UPS delivered an average of 14.3 million packages a day worldwide in the third quarter, up 4.7 percent from last year. In the United States, average daily volume increased 4 percent, while international volume rose 11.2 percent paced by double-digit gains in Europe and Asia.

Shares of UPS traded up $1.73 at $72.56 in trading on the New York Stock Exchange