McGraw-Hill Cos Inc's (MHP.N) profit fell in the third quarter, missing analyst estimates, as torpid credit markets hurt its Standard & Poor's rating business, and textbook sales dropped.

The European debt crisis dampened corporate bond issuance during the quarter, cutting into demand for ratings. Meanwhile, textbook sales are under pressure as local governments, reeling from lower tax receipts, are themselves slashing costs. Revenue fell 2.5 percent.

With revenue facing headwinds, the company said it is cutting at least $100 million of costs over the next 15 months. Third-quarter expenses for McGraw-Hill were $1.3 billion, down 2.7 percent from the same quarter last year.

The cost-cutting is a prelude to McGraw-Hill splitting itself into two companies with appropriate expense bases, the company said. The conglomerate said last month it is going to divide itself into a markets data company and a textbook publisher.

Investors including the Ontario Teachers' Pension Fund and hedge fund manager Jana Partners pressed the conglomerate to break itself up to boost shareholder returns, but their plans called for more asset sales and spin-offs.

McGraw-Hill is also facing political pressure linked to its Standard & Poor's rating unit. Ratings agencies have broadly been accused of enabling the financial crisis, and regulators and politicians are looking at how to reform the debt rating system.

S&P stripped the United States of its top triple-A ratings in August, spurring criticism from politicians and others who view its methodology as flawed.

In the third quarter, net income from continuing operations declined to $366.7 million. On a per-share basis, the company earned $1.21, the same as its adjusted per-share earnings from last year's third quarter last year, as the company bought back shares.

The average estimate from analysts was $1.23, according to Thomson Reuters I/B/E/S.

Last year's third quarter had included a 2-cent gain from a divestiture.

Revenue at S&P fell 1.8 percent and operating income dropped 6.1 percent on an adjusted basis, the company said.

In the education segment, revenue and operating profit both declined by 11 percent on an adjusted basis.

CHALLENGING MARKET

Overall, the business performed well despite challenging market conditions in global credit markets and historically low funding levels in the U.S. elementary-high school market, Chief Executive Terry McGraw said in the announcement from the company.

McGraw said the company is expected to report full-year earnings per share of $2.81 to $2.86. The company's guidance three months ago was to report at the top end of the range of $2.79 to $2.89.

McGraw-Hill said in September it intends to split into two companies next year, one holding its credit ratings and market information businesses and another publishing textbooks. The company also promised to cut costs and buyback more stock.

(Reporting by David Henry in New York; Editing by Derek Caney, Dave Zimmerman)