United Parcel Service

(UPS) - Get Report

reported Thursday its earnings surged in the first quarter, beating Wall Street's expectations by 4 cents, as the company's international business rose 23%.

Separately, UPS, the world's biggest package delivery company, also announced a multiyear deal with

Compaq Computer

(CPQ)

to manage Compaq's service parts network in North America.

Atlanta-based UPS said net income including some one-time items rose 63%, to $813 million, or 67 cents a diluted share, compared with $499 million, or 44 cents a diluted share in a year earlier.

Excluding one-time gains, UPS's earnings totaled $674 million, or 56 cents a diluted share.

Analysts had expected the company to post earnings of 52 cents a share, according to a survey conducted by

First Call/Thomson Financial

.

Revenues were up 14%, to $7.2 billion, compared with $6.33 billion in the 1999 first quarter.

UPS jumped 4 5/16, or 7%, to 63 3/8 in Thursday afternoon trading. (UPS finished up 4 7/16, or 8% at 63 1/2.)

Arthur Hatfield, an analyst at

Morgan Keegan

, attributed UPS's strong earnings growth to the strong increase in its international business as well as tight cost controls.

"Their international business did very well and they kept costs in line despite the fact that fuel costs were so high," Hatfield said, referring to the sharp run up in the price of crude oil throughout the quarter.

Crude oil peaked at $34.13 a barrel on March 7. It has since pulled back and was recently trading at $27.35 a barrel.

UPS, which went public in November, also announced a program to buy back up to $1.2 billion in stock. Norman Black, a UPS spokesman, said the program was in keeping with the company's plan to reduce the number of shares outstanding to the pre-IPO level.

In November, the company issued 109 million class B shares to the public, adding to the 1.1 billion class A shares in the hands of UPS employees and executives.

UPS offered in March to repurchase shares from class A shareholders, but only 68% of the shares were tendered, leaving UPS with $1.2 billion for further buybacks.

Hatfield said the buyback program would also help protect the company from a drop in its stock share price that could occur as of May 8 when a lockup expires on some 300 million class A shares held by company executives and employees.

Under the terms of the deal with Compaq,

UPS Logistics Group

, a subsidiary of UPS, will manage Compaq's transportation carriers and service parts inventory as well as order fulfillment services. UPS did not disclose the value of the deal.