Citing an expected slowdown in earnings growth on top of its recent quarterly earnings miss, U.S. Bancorp Piper Jaffray downgraded shares of

Wal-Mart

(WMT) - Get Report

on Friday.

"Until we gain confidence in Wal-Mart's ability to return to its normal rate of growth, we do not feel that it deserves to trade at its average forward multiple of 27 times" earnings, wrote analyst Jeffrey Klinefelter in a research report. He now expects a multiple of 25 times earnings.

As a result, the analyst downgraded the world's largest retailer, whose financial results are largely seen as an indicator of the overall retail economy, to market perform from outperform. Klinefelter also cut the company's price target to $56 from $61. (Piper Jaffray does investment banking for Wal-Mart.)

On Thursday, Wal-Mart

reported third-quarter earnings of 46 cents a share, which fell a penny short of analysts' estimates. In the previous-year quarter, the company earned 41 cents a share. Klinefelter noted that the company's gross margin decreased for the first time in eight quarters.

The analyst, however, maintained his 2004 earnings estimate of $2.27 a share, but noted that it represents an 11.5% increase from his 2003 estimate, which is "a significant deceleration from the 14.1% EPS growth forecast for the year and the 13.5% EPS growth posted last fiscal year." Wall Street's consensus for 2004 is $2.05 a share.

Klinefelter is worried that the company might not get the incremental traffic necessary during the holidays to justify a premium valuation. "We feel that in times of increased discretionary spending, other retailers, such as

Target

, with more branded/trend-right apparel may take incremental traffic."

Shares of Wal-Mart closed at $55.52 Thursday on the

New York Stock Exchange

.