* Q3 EPS 42 cents; Street view 38 cents
* Revenue up 4 percent
* Shares down 1 pct in afternoon trading (Adds detail on S&P, comments from analyst and Moody's CEO)
NEW YORK, Oct 29 (Reuters) - Moody's Corp (MCO.N), parent of Moody's Investors Service, reported better-than-expected quarterly earnings Thursday on a pickup in bond issuance, and raised its outlook for the full year.
Moody's, whose main business is providing ratings for debt, and its main rival McGraw-Hill Cos' (MHP.N) Standard & Poor's were hit hard by a slump in debt issuance during the recession, but a pickup in corporate financing activity in the third quarter boosted both companies' results.
Third-quarter revenue at Moody's climbed 4 percent to $451.8 million, while profit attributable to shareholders fell less than analysts had expected to $100.6 million, or 42 cents per share, from $113 million, or 46 cents per share, a year earlier.
Analysts on average expected earnings of 38 cents a share, according to Thomson Reuters I/B/E/S.
Revenue from rating corporate bonds soared 32 percent from a year earlier, while revenue from rating structured finance fell 17 percent.
Citing the strength of the corporate debt market, New York-based Moody's raised its full-year profit forecast to a range of $1.60 to $1.68 a share. It previously forecast $1.45 to $1.55.
"This speaks to how significantly the credit market conditions have improved," said Peter Appert, analyst at Piper Jaffray & Co, noting that in the past the company has tended to be conservative with its guidance.
McGraw-Hill's Standard & Poor's on Monday reported its first quarterly increase in revenue in almost two years and it also cited the pickup in corporate activity. [ID:nN26178422]
Moody's shares were down 1.1 percent to $24.35 in Thursday afternoon trading. The shares are up 23 percent this year.
Shares of McGraw-Hill, which also has media and education businesses, were up 2.7 percent at $30.
Both Moody's and Standard & Poor's, along with their smaller rival, Fimalac SA's (LBCP.PA) Fitch Ratings, have come under fire for fueling the financial crisis by assigning high ratings to mortgage-related securities that later defaulted.Regulators globally are stepping up scrutiny of credit ratings and a U.S. House of Representatives Financial Services Committee on Wednesday approved legislation that would more tightly regulate the agencies.
"We remain focused on playing a constructive part in the discussion of these issues with Congress, the (Securities and Exchange Commission), and other regulatory authorities and market participants," Moody's Chief Executive Raymond McDaniel said on a call with analysts.
Moody's in particular has been in the spotlight in the last few months after two former executives alleged that the credit agency favored revenues over ratings quality. McDaniel defended the company on the call and said independent investigations have shown the criticism was unfounded.
Moody's has seen a pickup in lawsuits, McDaniel said, adding that while Moody's is not concerned it is going to have a litigation loss, its legal costs are rising as a result of the litigation.
Warren Buffett's Berkshire Hathaway Inc (BRKa.N) is the largest Moody's shareholder. In July, Berkshire Hathaway said it had cut its stake to 16.98 percent from 20.4 percent, the first reported reduction since 2000. (Reporting by Elinor Comlay; editing by John Wallace and Tim Dobbyn)
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