Johnson Controls International (JCI) is undergoing an operational turnaround supported by improvements in its business system and stronger demand visibility across data center and mission-critical end markets, RBC Capital said in a Monday note.

The analysts said Johnson Controls has increased its long-term organic revenue growth outlook to high single digits from mid-single digits, driven by accelerating data center demand, which is expected to grow from about 12% of revenue to roughly one-third within five years amid AI infrastructure expansion.

RBC highlighted improved financial targets, including about 30% incremental margins and free cash flow conversion of 95% to 100%, driven by efficiency gains from the company's early-stage rollout of its lean business system across manufacturing sites.

The firm cautioned that the transformation remains a multi-year effort with execution risk as the system scales globally. It added that while near-term momentum is improving, the durability of demand and long-term margin expansion will remain key areas for investors to monitor, according to the report.

RBC maintained its sector perform rating on the stock with a price target of $154.

Shares of Johnson Controls were up 5.8% in Tuesday trading.

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