KB Home ( KBH) posted a solid 42% gain in first-quarter earnings and maintained its profit forecast for the full year, even as it again warned of higher cancellation rates and declining orders.

The Los Angeles-based builder's profit for the February quarter rose to $174.5 million, or $2.02 a share, from $122.7 million, or $1.41 a share, a year earlier. The results topped Thomson First Call's average analyst estimate of $1.96 a share.

Revenue increased to $2.19 billion from $1.64 billion, surpassing Wall Street's target of $2.17 billion. The company's unit deliveries rose 15% to 7,905 for the quarter, as the average home selling price increased 17%.

But KB Home's orders fell 12% from the same period last year to 8,719. Backlog rose 14% to 26,536 units, while the backlog value gained 25% to $7.24 billion.

"Our gross orders, which were only slightly below the year-earlier quarter, reflected steady demand," said Chief Executive Bruce Karatz in a statement. "However, higher cancellation rates, which rose to more normalized levels, adversely impacted our net order comparison in the first quarter. Since we are just entering our prime selling season, it is still too early in the year to forecast the longer-term sales trend.

The statement echoed similar cautions made in KB Home's annual report last month, when the company said it had been seeing increased cancellations and lower orders . Karatz said Wednesday that it's clear that housing markets have moderated from the overheated pace of the past few years.

"There are signs of cooling in the hottest markets on both coasts and a shift in investor activity from buying to selling, resulting in less demand and increased supply in certain markets," Karatz said. "Once these factors work their way through current housing supplies, however, we expect the market to move to a new equilibrium, which will provide a platform for continuing and sustainable growth by KB Home.

KB Home backed its December guidance for fiscal 2006 earnings of $11.25 a share. Analysts expect EPS of $1.26.

The builder's shares recently advanced $1.01, or 1.6%, to $65.60 in after-hours trading.