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UPDATE 3-UPS COO's retirement overshadows e-commerce fueled profit rise

(Adds executive comment, details on quarter)

Oct 22 (Reuters) - United Parcel Service Inc's e-commerce fueled quarterly profit beat on Tuesday was overshadowed by news that Jim Barber, widely viewed as the world's biggest parcel delivery firm's next leader, would retire at year-end.

Shares in Atlanta-based UPS fell 3.7 percent to $114.18 on news of the departure of Chief Operating Officer Barber, who oversees the company's global small package, freight, supply chain, freight forwarding and engineering, and was instrumental in the company's turnaround.

"Investors assumed he was going to be the next CEO and this caught us by surprise. Unfortunately the market does not like surprises," Seaport Global analyst Kevin Sterling said.

UPS volume for Next Day Air delivery within the United States rose about 24% in the quarter ended Sept. 30, benefiting from strong e-commerce demand and rival FedEx Corp's breakup with online retailer Amazon.com Inc this summer.

"It's Amazon, but it's beyond Amazon," Chief Executive David Abney said in a telephone interview with Reuters.

"Companies are competing on time. Next Day has become the standard. We see it in our Next Day Ground and our Next Day Air," said Abney, who noted that the company's multi-billion-dollar investments in network upgrades have shaved per-package costs down 2.5%.

Despite the advantage, investors remain wary of the potential ill-effects of the ongoing US-China trade war on the company as it gears up for what could be its biggest holiday season in history.

UPS net income rose 16% to $1.75 billion, or $2.01 per share, in the third quarter.

Revenue rose 5% to $18.32 billion.

Excluding items, the company earned $2.07 per share. Analysts on average had estimated earnings of $2.06 per share, according to IBES data from Refinitiv.

(Reporting by Sanjana Shivdas in Bengaluru and Lisa Baertlein in Los Angeles Editing by Shinjini Ganguli and Nick Zieminski)