Emerson Electric Co reported lower-than-expected quarterly earnings as floods in Thailand disrupted supplies and weak European economies hurt demand. The industrial conglomerate also cut its full-year sales forecast.

Emerson, whose shares fell 2.6 percent in morning trading, expects most of the pressures on its operations to be temporary. Its profit forecast was in line with analyst estimates.

Net earnings fell 23 percent to $371 million, or 50 cents per share, in the fiscal first quarter ended Dec. 31, from $480 million or 63 cents per share, a year earlier.

The profit missed analysts’ average estimate by 1 cent, according to Thomson Reuters I/B/E/S.

Sales fell 4 percent to $5.31 billion, slightly above Wall Street estimates of $5.29 billion. Floods in Thailand disrupted supplies of electronic components, hurting revenue and profits in the process management segment that serves the energy industry.

Margins in the process business were much lower than expected, Nomura analyst Shannon O’Callaghan said.

The floods also hurt Emerson’s network power segment, which makes uninterruptible power supplies. This business was also affected by U.S. telecommunications customers deferring investments.

Thailand’s worst floods in half a century forced a series of industrial estates to close in October, disrupting production of electronics, one of Thailand’s key exports.

Companies citing the floods this earnings season include carmakers Ford and Honda, electronic connector maker TE Connectivity, hard drive maker Western Digital Corp, as well as insurers XL Group Plc and Everest Re Group Ltd.

The insurance industry estimates its losses from the flooding to be at least $15 billion, and there are fears the number could rise as high as $20 billion.

FLOOD IMPACT

“The Thailand floods, slower growth in Asia and a host of other issues derailed the quarter, but there are signs of life in the underlying numbers,” said Edward Jones industrial analyst Matt Collins.

He added the network power and climate tech businesses lagged expectations, but U.S. construction activity was reviving and Emerson’s European businesses were more resilient than expected.

Emerson shares have lagged the S&P 500 index over the past year, but the stock remains one of the most richly valued among large, multinational industrial companies. Emerson stock was down 2.6 percent to $51.99. Counting Tuesday’s decline, Emerson is still up about 11 percent this year, beating a broader index of manufacturing stocks.

Weak demand from both Chinese and U.S. housing markets pushed down sales of Emerson’s air conditioning components. The company said it did not expect much recovery in Chinese construction markets this year.

Two other businesses, industrial automation and tools and storage, generated higher sales. Earnings increased in the tools business, reflecting strength in nonresidential construction markets.

Emerson said telecommunications as well as heating and cooling markets would improve and that industrial businesses were “strong,” but it trimmed its fiscal 2012 sales forecast. It expects core sales to rise by 4 percent to 6 percent, down from a December forecast of 5 percent to 7 percent.

The company expects 2012 earnings of $3.45 to $3.60 per share, which brackets analysts’ average estimate of $3.51. Estimates have come down since Emerson warned in December about the effects of the Thai floods and said Europe’s economies had entered a recession. (Additional reporting by Ben Berkowitz in New York; Editing by Lisa Von Ahn and John Wallace)