By Nick Carey

CHICAGO (Reuters) - United Parcel Service Inc <UPS.N> reported a higher quarterly net profit on Friday that met analyst expectations as revenue grew across its business units, and the company reaffirmed its full-year earnings outlook despite global economic uncertainty.

Chief Executive David Abney told Reuters UPS is adding capacity to its network and will work more closely with retailers ahead of this year's crucial holiday peak season.

The company had put in a solid a performance during the 2015 peak season after two years of struggling to handle holiday demand and the costs associated with it.

"We think it's going to be a repeat of last year," Abney said. "We just have more tools in our toolbox this year."

Often seen as a bellwether of U.S. economic activity, UPS revenue at its core U.S. domestic package business rose 2.4 percent on the year to just over $9 billion. Lower fuel costs and technology improvements helped UPS cut costs by 0.2 percent per package in the second quarter.

Like other package delivery companies, UPS has benefited from a rapid rise in ecommerce, but has also struggled to bring down the extra costs associated with making stops at individual residential addresses rather than at businesses.

UPS, a long-standing proponent of free trade, reiterated concerns over anti-trade rhetoric in this year's U.S. presidential election, arguing that U.S. businesses benefit from trade deals.

"It's not big companies that benefit; small and medium-sized enterprises need to compete and trade deals can make all the difference in the world to them," Abney told Reuters.

UPS said second-quarter margins at its more lucrative international package business were boosted by volume growth, strong pricing and improved network efficiency gains.

The package delivery company posted second-quarter net income of $1.27 billion, or $1.43 per share, up more than 3 percent from $1.23 billion, or $1.35 per share, a year earlier.

Analysts had, on average, expected earnings per share for the quarter of $1.43.

Total revenue grew nearly 4 percent to $14.63 billion, from $14.1 billion in the second quarter of 2015. Analysts expected quarterly revenue of $14.62 billion.

UPS reiterated its 2016 full-year profit outlook, expecting earnings per share in a range of $5.70 to $5.90.

The company was optimistic of meeting that target despite continued softening of the U.S. economy, thanks to investments in improving network efficiency.

UPS shares were down 1 percent at $107.69 in morning trading.

(Editing by Bernadette Baum)