The market volatility has been elevated so far in 2018, and if the current geopolitical and financial concerns stay in place, even temporarily, you can expect things to stay that way. While trade has been among the issues whipsawing the market, rising interest rates have been a major concern as well. If rates continue higher, companies with floating rate debt could face some major issues.

A recent Goldman Sachs research note points out that companies with large floating rate debt are underperforming companies with strong balance sheets. The firm’s study looked at a basket of 50 S&P 500 companies with floating-rate debt in excess of 5% of total obligations, and the analysts found that their shares lagged behind the broad U.S. equity benchmark by 3.2 percentage points in the first quarter this year.

In a new research report, Jefferies screened companies in the health care sector and found five that had the highest amount of exposure to interest increases based on the floating rate debt on the balance sheet. While companies can always amend the debt by refinancing, it makes sense that institutional investors will sell shares of companies underperforming the benchmarks, and the Goldman Sachs study confirms the possibility.

Jefferies found five companies with at least 2.5% leverage that have the highest percentage of floating rate debt. Investors that own these stocks may want to swap them for those with more stable balance sheets and a fixed-debt load.

Acadia Healthcare

This company has 54% of its debt in floating rate, or $1.8 billion. Acadia Healthcare Co. Inc. (NASDAQ: ACHC) is a behavioral health company that operates inpatient psych hospitals, residential treatment centers and outpatient clinics, as well as therapeutic school-based programs across the United States and in the United Kingdom.

The company operates 208 behavioral health care facilities with approximately 8,600 beds in 37 states, the United Kingdom and Puerto Rico. The company merged with Pioneer Health in 2011 and is run by the former management team at Psychiatric Solutions.

The Wall Street consensus price target for the shares is $43.13. The stock closed Friday at $39.46, in a 52-week trading range of $26.92 to $54.34.

BioScrip

This one has 60%, or $303 million, of floating rate debt on the books. BioScrip Inc. (NASDAQ: BIOS) is engaged in providing infusion solutions. It partners with physicians, hospital systems, skilled nursing facilities, health care payers and pharmaceutical manufacturers to provide patients access to post-acute care services.

The company offers home infusion services to provide clinical management services and the delivery of prescription medications. BioScrip provides services in coordination with, and under the direction of, the patient’s physician.

The posted consensus price target is $3.79, and shares closed Friday at $2.64. The 52-week range is $1.35 to $3.39.

Envision Healthcare

This company has 42% of the debt on the books in floating, or $1.8 billion. Envision Healthcare Inc. (NASDAQ: EVHC) operates through two segments, Physician Services and Ambulatory Services. As of December 31, 2017, its physician-led services encompassed providers at approximately 1,800 clinical departments at health care facilities in 45 states and the District of Columbia, including emergency department and hospitalist, anesthesiology, radiology/teleradiology and children’s services.

The company also offers ambulatory surgical centers services that provide surgical procedures across multiple specialties, including gastroenterology, ophthalmology and orthopedics. It operated 264 such centers in 35 states and the District of Columbia.

The consensus price target was last seen at $45.18. The shares ended the week at $37.79. The 52-week range is $23.77 to $64.

MEDNAX

This company has 60% of the debt out in floating rate, which represents a total of $1.1 billion. MEDNAX Inc. (NYSE: MD) is a national physician group practice consisting of almost 4,000 doctors and advanced practitioners focusing on pediatric medicine and anesthesiology.

Its Pediatrix Medical Group includes over 1,000 neonatal physician specialists who provide clinical care primarily within hospital-based neonatal intensive care units, to babies born prematurely or with medical complications. The American Anesthesiology division includes more than 2,575 anesthesiologists and advanced practitioners.

The consensus price objective is $56.69. The shares were last seen at $54.67, in a 52-week range of $40.56 to $69.40.

Surgery Partners

And this one has 59% of its debt in the floating rate category. That equals $1.3 billion. Surgery Partners Inc. (NASDAQ: SGRY) operates one of the largest networks of outpatient surgery facilities in the United States, consisting of 94 ambulatory surgery centers and five surgical hospitals. It also owns and operates 38 physician practices and seven urgent care facilities.

The company has developed the infrastructure to insource ancillary services such as diagnostics, anesthesia and pharmacy that already are being ordered by the surgeon but are typically outsourced to third-party providers.

The consensus price target is set at $19, and shares closed trading on Friday at $17.70. The 52-week trading range is $7.10 to $24.05.

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To be sure, all these companies have solid operating records, and just because they have a large amount of floating rate debt doesn’t mean they can’t refinance it at a fixed level, which still remains historically low. However, if the Federal Reserve does get aggressive this year and hikes three more times instead of two, it will put pressure on them to act.

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