UPDATE 1-Strong economy, higher rates lift FedEx quarterly profit

(Adds details from company's results, quote from CEO)

March 20 (Reuters) - Package delivery company FedEx Corp on Tuesday reported a higher quarterly net profit due to higher rates for deliveries, a strengthening economy, and changes to U.S. tax law but was hurt by peak holiday season costs and bad weather.

Shares in the Memphis-based company, considered an indicator of U.S. economic strength like its main rival United Parcel Service Inc, rose 2.6 percent in after-market trade following the results.

FedEx said its daily package volume was up 6 percent in the quarter, driven by demand during the peak holiday shipping season that begins after the U.S. Thanksgiving holiday and lasts through year-end.

"Execution of our long-term growth strategies, customer demand for the unique value of our broad portfolio of solutions and healthy growth in the global economy are driving our performance," FedEx Chief Executive Officer Fred Smith said in a statement accompanying the results.

FedEx posted net income for the fiscal third quarter ended Feb. 28 of $2.07 billion, or $7.59 per diluted share, up from $562 million, or $2.07 per share, a year earlier.

Adjusted for one-time items, the company reported earnings per share of $3.72. Wall Street analysts had expected earnings per share of $3.11.

Revenue for the quarter was $16.5 billion, versus the $16.16 analysts expected.

The quarterly results include benefits of $1.53 billion, or $5.60 per diluted share, due to changes to U.S. tax law.

(Reporting by Eric M. Johnson in Seattle Editing by Leslie Adler and Cynthia Osterman)