UPDATE 2-WPP cuts revenue outlook on Europe, U.S. slowdown

* Cuts revenue outlook on sharp September downturn

* Misses third-quarter revenue target

* Shares down 3.0 percent

(Adds reaction, share price)

LONDON, Oct 25 (Reuters) - WPP, the world's largest advertising group, has cut its revenue outlook for the second time in as many months after a sharp slowdown in September in North America and Continental Europe hit its third quarter.

WPP now expects full-year like-for-like revenue growth of 2.5-3.0 percent, compared with a forecast of 3.5 percent made at the end of August, chief executive Martin Sorrell said on Thursday.

The assessment follows similarly downbeat comments from rival Omnicom, which warned last week a high level of uncertainty among clients was making it hard to forecast for the next few quarters.

WPP shares were down 3.0 percent in early trading.

Sorrell told Reuters he had seen a sharp slowdown in September and the group was ``exceeding cautious'' about the future.

``Goodness knows frankly what happened in September,'' he said in an interview. ``July and August were OK, they weren't brilliant but they were in the 3 (percent revenue growth) range, but I think we're exceedingly cautious now.

''It is amazing how many clients have said they got nervous when they looked at September. There is a lot of concern out there.``

WPP revised its outlook after recording a slowdown in third-quarter like-for-like revenue growth, the key industry metric.

Growth was up by 1.9 percent in the three months, compared with a rise of 3.6 percent in the first half. Analysts had been expecting third-quarter growth of above 3 percent.

The slowdown in client spending comes at a difficult time for advertising groups, as clients generally start to plan their budgets for 2013 at this time of the year. Next year also lacks major events that boost spending like the Olympic Games or U.S. elections.

WPP, whose portfolio includes Ogilvy & Mather and Young & Rubicam, works for clients including Ford, Nestle and P&G. It said the summer Olympics had underpinned spending, but money was often switched from other budgets and not new spending.

Sorrell said the major concern in the business community had shifted in recent weeks from the euro zone debt crisis to how the U.S. government would tackle its deficit.

To help cushion the blow, WPP will keep a tight grip on costs and seek to keep headcount and costs in line with revenue growth. Operating margins and operating profits were in line with budget and ahead of last year in the first nine months.

Analysts said the results were disappointing and they would likely lower their forecasts for 2012 and 2013, but they were not a big surprise after the downbeat assessment from Omnicom.

''The third quarter statement will be taken disappointingly but the share price has come off to a degree on expectations things were not great,`` Liberum analyst Ian Whittaker said.

''Fundamentally we remain a 'Buy' but momentum over the next 3 to 6 months is likely to be limited.``

(Reporting by Kate Holton; Editing by Mark Potter)