UPDATE: UBS Upgrades AECOM Technology

In a report released Monday, UBS analyst Steven Fisher upgraded AECOM Technology 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 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