Updated with closing prices.

NEW YORK ( TheStreet) -- In this case, it looks like the third time wasn't the charm.

Shares of the paper and packaging companies were weak on Monday following news that a containerboard price increase instituted in August, the industry's third since the start of the year, hasn't stuck.

According to Deutsche Bank, industry periodical Pulp & Paper Week, revised published prices for August lower late on Friday with the editors citing "price concessions by small producers and an inability to raise corrugated box and sheet prices." The firm said the "abrupt shift" in the published price to $640/ton from $680/ton was a surprise, and quickly slashed its earnings estimates for the group.

"If one assumes that 2011 average prices will now be $40/ton lower, $1.4B billion in prospective 2011 EBITDA earnings before interest, taxes, depreciation and amortization has vaporized," Deutsche Bank said. "Use a 6-7X multiple on that EBITDA, the hypothetical valuation implications are impressive."

The group was hit hard by the news with International Paper ( IP) closing down 6.4% at $21.97 with volume of 20.3 million running at nearly three times the issue's daily average churn of around 7 million; Temple-Inland ( TIN) off 5.9% to finish at $18.90; Packaging Corp. of America ( PKG) losing 4.8% to $23.19; Boise Inc. ( BZ) falling 5% to $6.92; Rock-Tenn Co. ( RKT), tumbling 4.7% to $50.00; and Smurfit-Stone Container Co. ( SSCC) sliding 2.8% to $19.78.

Deutsche Bank made slight revisions to its earnings estimates for the rest of fiscal 2010, saving the bigger cuts for fiscal 2011 and adding that it would review its price targets for the stocks over the next few days. To give an example of the depth of the cuts for fiscal 2011, the firm dropped its EPS view for International Paper by 18% to $2.55 from its prior estimate of $3.10.

The current consensus estimate according to Thomson Reuters is for a profit of $2.66 a share, so the firm was already on the high side of expectations.

"DB Deutsche Bank had estimated that c'board containerboard price would peak at $690/ton in Sept/Oct. and avg. $665/ton in 2011," the firm said. "Given that the third price hike now appears to be dead, we are cutting our estimates to $640/ton for the remainder of FY'10 and $620/ton for FY'11."

The firm still has buy ratings on the companies it covers in the group, and said that, even without the the third hike, the containerboard companies were trading at low multiples relative to historical averages.

On a forward basis, using the average Wall Street views for fiscal 2011, International Paper was looking like the cheapest of the group prior to Monday's drop, trading at 8.2 times, compared to 8.9X for Temple-Inland, 10.4X for Packaging Corp. and 8.7X for Rock-Tenn.

Year-to-date, performance of the individual stocks has been all over the map with International Paper down 12%, Packaging Corp. up 6%, Temple-Inland off 5%, Rock-Tenn up 4%, Smurfit-Stone up nearly 60%, and Boise shares having appreciated more than 35%.

As for the failure of the price increase to stick, Deutsche Bank put a portion of the blame on the companies themselves, saying the big producers needed to be "more disciplined" on pricing.

"This hike was a 'toughie,' the firm said. "But, with operating rates in the high 90s, inventories at historically low levels, and demand in positive territory, rational investors have legitimate questions for industry leaders."

-- Written by Michael Baron in New York.

>To contact the writer of this article, click here: Michael Baron.

>To submit a news tip, send an email to: tips@thestreet.com

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

More from Stocks

One Thing to Consider Over Memorial Day Weekend: Are Stocks About to Collapse?

One Thing to Consider Over Memorial Day Weekend: Are Stocks About to Collapse?

North Korea, Apple, GPDR and Gap - 5 Things You Must Know

North Korea, Apple, GPDR and Gap - 5 Things You Must Know

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Complying With GDPR Could Be Costly for Facebook, Google and Other Tech Giants

Complying With GDPR Could Be Costly for Facebook, Google and Other Tech Giants

Market Can't Handle the Wild Ride: Cramer's 'Mad Money' Recap (Thursday 5/24/18)

Market Can't Handle the Wild Ride: Cramer's 'Mad Money' Recap (Thursday 5/24/18)