Moody's 3Q Earnings Fall 13 Percent

Net income dropped to $136.9 million, or 51 cents per share, from $157 million, or 55 cents per share, in the year-ago period. Revenue rose 6 percent to $525 million from $495.5 million.

Analysts polled by Thomson Financial, on average, estimated earnings at 55 cents per share on revenue of $520.3 million.

Global structured finance revenue fell 6 percent to $200.8 million. U.S. structured finance revenue fell 14 percent, led by a 52 percent decrease in revenue from rating residential mortgage-backed securities, the company said.

Like rival credit agencies Standard & Poor's and Fitch, Moody's derives much of its revenue from reviewing and rating the credit worthiness of corporate bonds and structured finance deals. The tightening market, sparked by troubles in mortgage loans to borrowers with shaky credit histories, led to fewer transactions, hurting Moody's top line. By comparison, Moody's overall revenue had risen 32 percent in the first quarter and 26 percent in the second quarter of this year.

The company lowered its full-year forecast in anticipation of further weakness in the debt markets.

At the same time revenue growth was crimped, expenses increased 21 percent to $274.5 million, mainly due to moving the company's headquarters in New York and international expansion.

Moody's Investors Service and global research divisions experienced revenue growth, primarily in international markets. Moody's Investors Service benefited from positive foreign currency translation, primarily due to the weakness of the U.S. dollar relative to the euro and British pound. Moody's global research revenue rose 29 percent to $83.2 million, driven by strong sales of its core research products to existing customers and several new customers, primarily in Europe.

"Moody's delivered revenue growth in the third quarter despite significant deterioration in credit market activity in August and September," said Raymond McDaniel, chairman and chief executive, in a release. "However, operating income and earnings per share both declined as the impact of actions to manage expenses lagged the pace of reduced market activity."