When a company decides to split its stock, it’s usually a good sign for shareholders. For one reason or another, the company has decided it would like more shares outstanding on the market. This is usually accompanied by a run-up in the share price in anticipation of the split. And for traders, this is where an opportunity for profits is to be had…

Gorman-Rupp (NYSE: GRC) is a worldwide designer, manufacturer and seller of pumps and pump-motor controls.

#-ad_banner-#The $653-million company offers a rising dividend, shows solid growth and displays bullish technicals.

Technical analysis suggests shares can return more than 20% in a short amount of time. However, your opportunity to enter the trade near current prices may be limited.

That’s because only shareholders on record as of May 13, 2011, are eligible for the company’s five-for-four stock split, which takes place on June 10, 2011.

I believe the stock may move higher in anticipation of the upcoming split.

But it’s not only the split that makes the company attractive.

It’s also that this Ohio-based company is seeing increased global demand for its products: pumps and pump-motor controls.

The company’s pumps are used for a variety of applications, including construction, petroleum, agriculture, fire protection, waste management, heating and air conditioning projects.

Although the global economic downturn hurt Gorman-Rupp, the company responded in 2010 by lowering its operating costs and fine-tuning its products to better match demand.

Gorman-Rupp also last year acquired a competitor, private specialty water and petroleum pump supplier National Pump Co., to gain further dominance in this segment of the pump market.

Technically, Gorman-Rupp appears strong.

The stock is in a major uptrend and looks to be on the verge of bullishly breaking out of an ascending triangle formation. The triangle is marked by resistance — which is currently being challenged — near $40 and a second, rapidly ascending uptrend line off the stock’s January 2011 low of $30.40.

This triangle is the second ascending pattern that has been formed in the past two years.

An initial, larger triangle formed as the stock climbed from its June 2009 low of $17.96 to a higher low of $24.59 in August 2010. Off this $24.59 low, the stock formed an accelerated uptrend line, breaking through old resistance, which has become new support, around $31.25.

If the stock can definitively break through current $40 resistance, then the measuring principle, calculated by adding the height of the triangle to the breakout level, projects a price target of $48.75 ($40 – $31.25 = $8.75; $8.75 + $40 = $48.75). This represents a potential 21.9% gain from current levels.

As I’ve mentioned, the company has announced a five-for-four stock split, set for June 10 to shareholders on record as of May 13. The stock could run up during the May 9 trading week in anticipation of this split.

Fundamentally, the company appears strong.

In late April, Gorman-Rupp released upbeat first-quarter results. Revenue for the period increased 27.8% to $84.1 million, from $65.8 million in the year-ago quarter, due to stronger sales in the industrial, agricultural, and construction markets.

With a large number of pump orders on backlog, analysts expect upcoming second-quarter sales will increase 25.6% to $82.6 million, from $65.8 million in the comparable quarter a year ago.

As the pump market continues to expand, analysts’ project full-year 2011 revenue will increase 15.8% to $343.7 million, from $296.8 million in 2010. By 2012, continued economic growth could help the company see a further 8% revenue gain, with sales totaling $371.3 million.

The earnings outlook is equally solid.

Driven by international market expansion, first-quarter 2011 earnings surged 55.6% to $0.42 per share, from $0.27 in the year-earlier period.

For the upcoming second-quarter, analysts expect earnings to increase 48.2% to $0.40 per share, from $0.27 in the year-ago period.

For the full 2011 year, analysts’ project earnings will increase 16.1% to $1.80, from $1.55 in full-year 2010.

In tandem with reporting strong first-quarter results, the company raised its quarterly dividend by about 7.1%, to $0.11 per share on its post-split common shares, payable to shareholders of record as of May 13.

Given that GRC shows fundamental and technical strength, along with a rising dividend and an upcoming stock split, I plan to go long on the pump manufacturer.

I will enter a position at the opening of trading on Monday, May 9. My stop-loss is $31.70, near current support. As projected by the measuring principle, my target is $48.75.

The risk/reward ratio is about 1.05:1.

Action to Take –> Given that GRC shows fundamental and technical strength, along with a rising dividend and an upcoming stock split, traders should consider going long on the pump manufacturer.

If you enter a position during trading on Monday, May 9, my recommended stop-loss is $31.70, near current support. As projected by the measuring principle, my target is $48.75.

P.S. — I don’t know if you’re aware of this or not, but a 20-year energy agreement between the United States and Russia is about to expire. The problem is, this deal supplies 10% of America’s electricity. When the Russians refuse to renew the agreement, the U.S. will face an entirely new kind of energy crisis. This disruption could send a handful of energy stocks through the roof. Keep reading…