Transport companies posted better-than-expected first-quarter results on improved volumes in a sign that the domestic economic recovery is starting to catch up with the rest of the world.

United Parcel Service , the world's largest package delivery service, reported higher-than-expected first-quarter earnings on Tuesday, as did Kansas City Southern Railway Co , which said an upswing in manufacturing helped spur a 15 percent increase in volume.

UPS's results primarily reflected an improving global economy, but average daily volume rose in the domestic package segment as well, the first year-over-year growth in two years.

At Kansas City Southern, increased volumes in most of its business lines drove double-digit gains in revenues and offered encouraging signs for the year ahead.

The company's shares rose 3.4 percent in morning trading, while UPS fell 1.0 percent.

Earnings at UPS rose 33 percent to $533 million, or 53 cents per share from a year earlier, in line with the company's April 14 preannouncement.

Excluding special items, earnings of 71 cents per share beat the analysts' average estimate of 57 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 7 percent to $11.7 billion amid an 18 percent volume jump in the international package segment.

Kansas City Southern posted net income of $32.6 million, or 34 cents a share, compared with a year-earlier loss of $8.1 million, or 9 cents per share.

Analysts on average were expecting earnings of 31 cents a share.

Revenue at the Kansas City, Missouri-based railroad rose 26 percent to $436.3 million, beating analysts' expectations of $412.4 million.

Atlanta-based UPS also confirmed its 2010 outlook, which it raised on April 14 to a range of $3.05 to $3.30 per share. The outlook's midpoint of $3.18 exceeds analysts' estimates of $3.16.

UPS rival FedEx Corp and other transports are considered bellwethers because an increase in their volumes correlates with economic strength.

Last month FedEx reported higher-than-expected quarterly profit and raised its fiscal-year outlook.

(Reporting by Helen Chernikoff and Carey Gillam; Editing by Lisa Von Ahn)

Manufacturing