KB Home cut costs and improved margins to report a fiscal fourth quarter profit that beat Wall Street forecasts, But the nation’s fifth-largest homebuilder continued to be cautious about future demand.

The Los Angeles company on Friday reported net income of $17.4 million (23 cents per share) for the quarter ended Nov. 30, compared with nearly $101 million ($1.31) a year earlier due to a change in tax legislation that benefited the company.

Revenue fell 33 percent to $451 million. The impact was offset by a rise in gross margins from 6.8 percent to 19.1 percent as the company reduced its selling, general and administrative expenses by 35 percent.

Analysts surveyed by Thomson Reuters on average expected per-share profit of 17 cents on revenue of more than $441 million.

The average selling price on the company’s homes rose 14 percent, but analysts expect that to change as KB Home offers more incentives to boost sales. New orders fell 25 percent to 1,085 units, and the cancellation rate as a percentage of gross sales rose from 31 percent to 37 percent.

“Entering 2011, housing market conditions remain difficult due to soft demand and a general oversupply of homes available for sale,” Chief Executive Jeffrey Mezger said in a statement. “While there are indications that the overall economy has started to recover, the lack of improvement in employment and consumer confidence is likely to continue to hinder a sustained housing recovery.”

Shares were up 48 cents, or 3.4 percent, to $14.81 in midday trading on the New York Stock Exchange.