We are reaffirming our Neutral recommendation on Fluor Corporation ( FLR - Analyst Report ) . The company reported robust top-line and bottom-line results in first-quarter 2012, with revenue increasing 24% year over year. Fluor benefited from a significant rise in Industrial & Infrastructure, Oil & Gas and Global Services revenues. Further, international market for oil & gas production and refining and mining were also strong. However, the company’s overall cost and expenses increased a significant 24.6%, slightly affecting its earnings before taxes. Further, uncertain economic conditions remain a matter of concern.

Fluor is one of the largest professional services firms, providing engineering, procurement, construction and maintenance as well as project management services on a global basis. It serves a diverse set of industries worldwide including oil and gas, chemical and petrochemicals, transportation, mining and metals, power, life sciences and manufacturing. It is also a primary service provider to the U.S. federal government. It performs operations and maintenance activities for major industrial clients and, in some cases, operate and maintain their equipment fleet.

Fluor is one of the few engineering and construction companies that possess technological expertise, logistics and procurement capabilities, and project management experience needed to execute on a large variety of projects. Given its strong financial position, Fluor has ample financial resource to pursue a niche acquisition program, aimed at strengthening its considerable service portfolio. The company is delivering solid results driven by its diversified business model and targeted new awards strategy. With a proven management team and a strong balance sheet, Fluor is poised to outperform in the current market environment.

Fluor’s favorable contract mix, diverse service offerings and strong relationships around the world allow it to sustain operating margin going forward compared with its peers without diminishing growth potential. However, the current worldwide financial crisis will likely affect a portion of its client base, subcontractors and suppliers, and could materially affect its backlog and profits. Backlog is subject to unexpected adjustments and cancellations; therefore, it may not be a reliable indicator for future earnings.

In addition, the company bears the risk of cost overruns of approximately 25% of the dollar value of its contracts. It may experience reduced profits, or in some cases, losses under these contracts if costs increase above its estimates. It depends on third parties to complete many of its contracts.

Fluor currently holds a Zacks #3 Rank, implying a short term ‘Hold’ rating on the stock.