UPDATE: UBS Upgrades AECOM Technology

In a report released Monday, UBS analyst Steven Fisher upgraded AECOM Technology (NYSE: ACM) from Neutral to Buy and increased the company's price target from $33.00 to $40.00.

Fisher favors AECOM Technology's move to URS transaction and cost synergies with debt reduction to be a key factor with the company's merger with URS (NYSE: URS). Fisher added to the merger details by stating the combination of the two companies will generate solid cash flows.

AECOM Technology anticipates synergy costs of $250 million. UBS breaks down the synergy costs to represent about $1.10 per share of the company's earnings for the next two to three years. UBS estimates AECOM to encounter about $1 per share of interest expense on its current $5.2 billion debt load and anticipate the company to decrease that debt by $1.5 billion to $2 billion over the next 3 years, representing $0.30 to $0.40 per s hare.

UBS price target of $40 is given by a 11.5 to 12x P/E multiple (unchanged) on a discounted pro-forma 2016 estimate EPS of $3.75, discounted by 10 percent in one year.

Shares of AECOM closed Monday at $34.98, up 10.1 percent