UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


                                    FORM 10-Q


           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1998

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

       For the transition period from ............... to ...............

                          Commission File Number 1-1228


                          Stone & Webster, Incorporated
             (Exact name of registrant as specified in its charter)

                      Delaware                       13-5416910
    (State of other jurisdiction of       (IRS Employer Identification No.)
     incorporation or organization)

                 245 Summer Street, Boston, MA              02210
           (Address of Principal Executive Offices)      (Zip Code)

                                 (617) 589-5111
              (Registrant's telephone number, including area code)




Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X. No .

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date. Common Stock: 12,799,925 shares
as of July 31, 1998.

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries


                                    Form 10-Q


                                      Index

                                                                        Page No.

PART I.  FINANCIAL INFORMATION

         Item 1. Financial Statements

                 Consolidated Statements of Operations (Unaudited):
                  Three and Six Months Ended June 30, 1998 and
                   June 30, 1997...........................................3

                 Consolidated Balance Sheets (Unaudited):
                  June 30, 1998 and December 31, 1997......................4

                 Condensed Consolidated Statements of Cash Flows
                  (Unaudited):
                   Six Months Ended June 30, 1998 and June 30, 1997........5

                 Notes to Condensed Consolidated Financial Statements
                  (Unaudited) ............................................6-10

         Item 2. Management's Discussion and Analysis of Results of
                  Operations and Financial Condition.....................11-15


PART II. OTHER INFORMATION

         Item 4. Submission of Matters to a Vote of Security Holders.....16-17
         Item 5. Other Events..............................................17
         Item 6. Exhibits and Reports on Form 8-K..........................17


SIGNATURES.................................................................18



















                                       2
<PAGE>
PART I.  Financial Information
Item 1.   Financial Statements


                 Stone & Webster, Incorporated and Subsidiaries
                Consolidated Statements of Operations (Unaudited)
                    (In thousands, except per share amounts)


                                   Three Months Ended        Six Months Ended
                                         June 30,                June 30,
                                   1998         1997         1998        1997
                                   ----         ----         ----        ----
Revenue                          $317,004     $286,258     $610,961    $635,783
Cost of revenue                   300,284      255,544      566,513     579,214
                                 --------     --------     --------    --------
     Gross profit                  16,720       30,714       44,448      56,569
General and administrative
 expenses                          15,515       17,666       31,609      34,719
                                 --------     --------     --------    --------
Operating income                    1,205       13,048       12,839      21,850
Other income (expense)
     Interest income                  297        1,047        1,500       1,877
     Interest expense                (591)        (445)      (1,008)       (872)
                                 --------     --------     --------    --------
Total other (expense) income,
 net                                 (294)         602          492       1,005
Income before provision for
 income taxes                         911       13,650       13,331      22,855
Income tax provision                  260        4,168        5,067       7,805
                                 --------     --------     --------    --------
Net income                       $    651     $  9,482     $  8,264    $ 15,050
                                 ========     ========     ========    ========
Per share amounts:
Basic and diluted earnings
 per share                          $0.05        $0.74        $0.64       $1.17
                                    =====        =====        =====       =====
Dividends declared per share        $0.15        $0.15        $0.30       $0.30
                                    =====        =====        =====       =====

Weighted average number of
 shares outstanding:
Basic                              12,792       12,796       12,797      12,801
                                 ========     ========     ========    ========
Diluted                            12,922       12,913       12,927      12,852
                                 ========     ========     ========    ========

     See accompanying notes to condensed consolidated financial statements.



                                       3
<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
                     Consolidated Balance Sheets (Unaudited)
                    (In thousands, except per share amounts)

                                                     June 30,       December 31,
                                                       1998             1997
                                                     --------       ------------
Assets
Current assets:
  Cash and cash equivalents                          $ 23,315         $ 75,030
  U.S. Government securities, at amortized cost
   which approximates fair value                            -           31,909
  Accounts receivable, principally trade, net         248,537          180,057
  Costs and revenues recognized in excess of
   billings                                            95,040          102,476
  Deferred income taxes                                18,931           18,835
  Other                                                 1,313              337
                                                     --------         --------
Total current assets                                  387,136          408,644

Assets held for sale                                    6,744           10,395
Fixed assets, net                                     146,223          140,177
Domestic prepaid pension cost                         158,493          148,155
Note receivable                                        15,000           15,000
Other assets                                           41,044           16,406
                                                     --------         --------
Total assets                                         $754,640         $738,777
                                                     ========         ========
Liabilities and Shareholders' Equity
Current liabilities:
 Bank loans                                          $ 20,000         $      -
 Current portion of long-term debt                      1,885            1,750
 Accounts payable, principally trade                   63,213           85,338
 Billings in excess of costs and revenues
  recognized                                          138,391          115,730
 Accrued liabilities                                   82,927           79,351
 Accrued taxes                                          6,012           14,689
                                                     --------         --------
Total current liabilities                             312,428          296,858

Long-term debt                                         21,594           22,510
Deferred income taxes                                  60,325           57,463
Other liabilities                                      15,351           16,714

Shareholders' equity:
 Preferred stock, no par value; authorized
  2,000,000 shares; none issued                             -                -
 Common stock, $1 par value; authorized
  40,000,000 shares; 17,731,488 shares issued
   including shares held in treasury                   17,731           17,731
 Capital in excess of par value of common stock        51,547           51,426
 Retained earnings                                    428,761          424,287
 Accumulated other comprehensive income                (5,825)          (2,205)
 Less:  Common stock held in treasury, at cost
         (4,937,699 and 4,908,975 shares)             128,333          127,070
        Employee stock ownership and restricted
         stock plans                                   18,939           18,937
                                                     --------         --------
Total shareholders' equity                            344,942          345,232
                                                     --------         --------
Total liabilities and shareholders' equity           $754,640         $738,777
                                                     ========         ========

     See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>

                 Stone & Webster, Incorporated and Subsidiaries
           Condensed Consolidated Statements of Cash Flows (Unaudited)
                                 (In thousands)


                                                               Six Months
                                                             Ended June 30,
                                                           1998          1997
                                                           ----          ----
Cash Flows from Operating Activities:
 Net income                                              $  8,264      $15,050
 Adjustments to reconcile net income to net cash
  provided by operating activities:

   Depreciation and amortization                            7,675        6,677
   Amortization of net cost of stock plans                    732          580
   Gain from asset divestiture                             (3,066)           -
   Deferred income taxes                                    2,766        6,593
   Domestic prepaid pension cost                          (10,338)      (9,402)
   Changes in operating assets and liabilities           (103,345)      64,393
                                                         --------      -------
  Net cash (used for) provided by operating activities    (97,312)      83,891

Cash Flows from Investing Activities:
 Proceeds from maturities of U.S. Government
  securities                                               31,909        4,000
 Proceeds from asset divestiture                           13,546            -
 Purchases of fixed assets, net                           (13,721)      (8,739)
 Purchases of U.S. Government securities                        -      (34,509)
                                                         --------      -------
 Net cash provided by (used for) investing activities      31,734      (39,248)
                                                         --------      -------

Cash Flows from Financing Activities:
 Repayments of long-term debt                                (781)        (756)
 Increase (decrease) in bank loans                         20,000       (5,000)
 Purchases of common stock for treasury                    (1,514)      (2,309)
 Dividends paid                                            (3,842)      (3,840)
                                                         --------      -------
 Net cash provided by (used for) financing activities      13,863      (11,905)
                                                         --------      -------
Net (decrease) increase in cash and cash equivalents      (51,715)      32,738
Cash and cash equivalents at beginning of period           75,030       57,887
                                                         --------      -------
Cash and cash equivalents at end of period               $ 23,315      $90,625
                                                         ========      =======


     See accompanying notes to condensed consolidated financial statements.




                                       5
<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Unaudited)


(A)  The accompanying  unaudited condensed  consolidated financial statements of
     Stone & Webster,  Incorporated and  Subsidiaries  (the "Company") have been
     prepared in accordance with generally  accepted  accounting  principles for
     interim  financial  information and with the  instructions to Form 10-Q and
     Article 10 of Regulation S-X.  Accordingly,  they do not include all of the
     information and notes required by generally accepted accounting  principles
     for complete  financial  statements.  The  December  31, 1997  consolidated
     balance sheet data was derived from audited  financial  statements but does
     not  include all  disclosures  required by  generally  accepted  accounting
     principles.  In the opinion of management,  all adjustments  (consisting of
     normal recurring adjustments)  considered necessary for a fair presentation
     have been included.  Operating results for the quarter and six months ended
     June 30, 1998 are not  necessarily  indicative  of the results  that may be
     expected  for the fiscal  year  ending  December  31, 1998 or for any other
     future period. For further information, refer to the consolidated financial
     statements and notes  included in the Company's  Annual Report on Form 10-K
     for the fiscal year ended December 31, 1997.

     The  preparation  of  condensed   consolidated   financial   statements  in
     conformity  with  generally   accepted   accounting   principles   requires
     management  to make  estimates  and  assumptions  that  affect the  amounts
     reported in the consolidated  financial  statements and accompanying notes.
     Actual results could differ from those estimates.

(B)  Fixed assets, net is stated at cost less accumulated depreciation of $174.2
     million at June 30, 1998 and $165.4 million at December 31, 1997.

(C)  Revenue and operating income by business segment were the following for the
     quarter and six months ended June 30, 1998 and 1997 (in thousands):

                                            Three Months         Six Months
                                            Ended June 30,     Ended June 30,
                                           1998      1997      1998      1997
                                           ----      ----      ----      ----
     Revenue:
      Engineering, construction and
        consulting services              $309,387  $280,374  $596,484  $625,060
      Cold storage and related
       activities                           7,617     5,884    14,477    10,723
                                         --------  --------  --------  --------
          Total revenue                  $317,004  $286,258  $610,961  $635,783
                                         ========  ========  ========  ========
    Operating income:
     Engineering, construction and
      consulting services                $    286  $ 13,697  $ 11,307  $ 23,687
     Cold storage and related
      activities                            2,295     2,021     4,580     3,181
                                         --------  --------  --------  --------
                                            2,581    15,718    15,887    26,868
     General corporate expenses            (1,376)   (2,670)   (3,048)   (5,018)
                                         --------  --------  --------  --------
          Total operating income         $  1,205  $ 13,048  $ 12,839  $ 21,850
                                         ========  ========  ========  ========


                                       6

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                                  (Continued)

(D)  The Company had a valuation  allowance of $3.6 million at June 30, 1998 and
     December  31, 1997 for deferred tax assets  related to net  operating  loss
     carryforwards.  The  valuation  allowance at June 30, 1998  comprises  $3.5
     million relating to state net operating loss carryforwards and $0.1 million
     relating to the carryforwards of international subsidiaries.

(E)  Basic  earnings  per share for the six months  ended June 30, 1998 and 1997
     were  computed  based on the  weighted  average  number  of  common  shares
     outstanding  during the period of 12,797,455 and 12,801,097,  respectively.
     Diluted  earnings per share for the six months ended June 30, 1998 and 1997
     were computed based on the weighted  average common and dilutive  potential
     shares   outstanding  during  the  period  of  12,926,628  and  12,852,177,
     respectively.  The  difference  between the basic and the  dilutive  shares
     outstanding  represents  the potential  dilution from the exercise of stock
     options  during the period  assuming the  application of the treasury stock
     method.

(F)  Pension related items, which reduced operating costs, were $5.1 million and
     $10.2  million for the quarter and six months ended June 30, 1998  compared
     to $4.5  million and $9.0  million for the same  periods in the prior year.
     These items  increased net income by $3.1  million,  or $0.24 per share and
     $6.2  million or $0.48 per share for the quarter and six months  ended June
     30, 1998,  compared with $2.7 million,  or $0.21 per share and $5.5 million
     or $0.42 per share for the same  periods  in 1997.  Pension  related  items
     include a net pension credit for the Company's domestic  subsidiaries and a
     net pension cost for its foreign  subsidiaries.  The pension  credit is the
     result  of a plan  that  is  funded  in  excess  of the  projected  benefit
     obligation  and income from the  amortization  of  Statement  of  Financial
     Accounting  Standards No. 87 net transition  asset.  The plan is overfunded
     primarily due to favorable asset performance.  The transition asset will be
     fully amortized in 1998.

(G)  Following  approval by the  Shareholders at the Company's annual meeting on
     May 14, 1998, the Company's Restricted Stock Plan and the 1995 Stock Option
     Plan were replaced by the Stone & Webster, Incorporated Long-Term Incentive
     Compensation  Plan (the "1998 Plan"),  effective  January 1, 1998. The 1998
     Plan  permits the grant of  nonqualified  stock  options,  incentive  stock
     options,  restricted stock,  performance  shares, and performance units. No
     further awards will be granted under the Restricted  Stock Plan or the 1995
     Stock  Option  Plan.  Options  previously  granted  will  become  or remain
     exercisable  in  accordance  with  the  terms  of  the  award  until  their
     expiration or earlier cancellation.

     Under the 1995 Stock  Option Plan for the  six-month  period ended June 30,
     1998,  nonqualified  options for 21,000 shares of common stock were granted
     to  employees  at a  weighted  average  per share  option  price of $41.84.
     Twenty-five percent of the nonqualified  options granted become exercisable
     on each of the first  four  anniversary  dates of the grant.  Options  with
     respect to 6,750 shares were  exercised  and options for 31,625 shares were
     cancelled  during the six-month  period.  Nonqualified  options for 350,500
     shares remain exercisable.


                                       7

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                                  (Continued)

     Under  the  1998  Plan  for the  six-month  period  ended  June  30,  1998,
     nonqualified and incentive stock options for 245,500 shares of common stock
     were  granted  to  employees  at  a  per  share  option  price  of  $43.19.
     Twenty-five  percent of the options granted will become exercisable on each
     of the first four anniversary  dates of the grants.  Therefore,  no options
     under this plan will be  exercisable  before May 14, 1999. No option shares
     were  cancelled  under this Plan for the six- month  period  ended June 30,
     1998.

(H)  In July 1995 and  January  1998,  the  Board of  Directors  of the  Company
     authorized an increase in the share repurchase  program from 1.0 million to
     2.5  million   shares  and  from  2.5   million  to  3.0  million   shares,
     respectively,  of the Company's common stock in open market transactions at
     prevailing  prices.  For the six months  ended June 30,  1998,  the Company
     acquired 38,387 shares at a cost of $1.5 million.  The amount and timing of
     stock repurchases will depend upon market conditions,  share price, as well
     as other  factors.  The  Company  reserves  the  right to  discontinue  the
     repurchase program at any time.

(I)  Effective  January 1, 1998,  the Company  adopted  Statement  of  Financial
     Accounting Standards No. 130, Reporting  Comprehensive Income ("SFAS 130").
     SFAS 130 establishes  standards for reporting and display of  comprehensive
     income and its  components  (revenues,  expenses,  gains and  losses).  The
     adoption of this  statement  only  changes the  display and  disclosure  of
     information and does not impact amounts previously  reported for net income
     or shareholders' equity. Comprehensive income (loss) was ($4.9) million and
     $9.6 million for the quarters  ended June 30, 1998 and 1997,  respectively.
     Other  comprehensive  income (loss) consists of translation  adjustments of
     $(5.6)  million and $0.1 million for the  quarters  ended June 30, 1998 and
     1997,  respectively.  For the six  months  ended  June  30,  1998  and 1997
     comprehensive  income was $4.6  million  and $14.7  million,  respectively.
     Other  comprehensive  income consists of translation  adjustments of ($3.6)
     million and ($0.4) million for the six months ended June 30, 1998 and 1997,
     respectively.

(J)  During the first quarter of 1998, the Company  completed its divestiture of
     underutilized  office space with the sale of its Cherry  Hill,  New Jersey,
     office building for $13.5 million in cash. The Company recognized a gain on
     the sale of this  property of $3.1 million ($2.0 million after tax or $0.15
     per share). In 1996, the carrying value of the building was written down to
     fair value and the loss,  per Statement of Financial  Accounting  Standards
     No. 121, was recorded as an operating  loss. The Company also completed the
     disposal  of its  remaining  unused  office  space in its  former  New York
     corporate  offices.  The provisions  made in 1996 for losses on sublease or
     lease  cancellation  of this space have, in aggregate,  not been materially
     different from the actual costs incurred in disposal of the excess space.

(K)  In January 1998, the Company  purchased the assets of Belmont  Constructors
     Company,  Inc.  ("Belmont").  The  purchase  price is  contingent  upon the
     results of certain  long-term  contracts which will be completed by the end
     of 1998.  Belmont is  principally  engaged in  providing  construction  and
     construction  management  services  to a diverse  group of  clients  in the
     hydrocarbons,  water,  industrial and power markets.  The Company  recorded
     this  transaction  using the  purchase  method of  accounting  for business
     combinations.  The  results  of  Belmont  are  included  in  the  Company's
     condensed consolidated financial statements from the date of acquisition.


                                       8

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                                  (Continued)


(L)  In the second quarter of 1998, the Company acquired ownership of S.C. Wood,
     LLC (SC Wood) in  settlement  of  claims  against  a client  who  failed to
     fulfill  certain  contractual  obligations.  The assets of SC Wood  consist
     primarily  of a petroleum  products  pumping  station.  The Company  paid a
     nominal amount as the purchase price.  The assets of SC Wood are carried at
     $6.7 million representing the net book value of services and other advances
     in connection with the project. The Company plans to sell the operations of
     SC Wood and therefore the net assets of SC Wood are  classified as an asset
     held for  sale in the  Company's  Consolidated  Balance  Sheet.  SC Wood is
     principally  operated as a pumping  station  which uses natural gas to pump
     petroleum products. The results of SC Wood, after the acquisition, were not
     included in the Company's  Consolidated Statement of Operations for the six
     months ended June 30, 1998 because the  transaction  occurred at the end of
     the second quarter.

(M)  Subsequent to the close of the second quarter of 1998, the Company signed a
     definitive   agreement   to  acquire   the  shares  of  a   multi-location,
     privately-owned cold storage company for $75 million in cash and additional
     consideration  for working  capital and certain capital  expenditures.  The
     Company   retains   an  option  to  cancel  the   transaction   if  certain
     contingencies are not resolved.  It is expected that the contingencies will
     be resolved and the transaction closed during the third quarter of 1998.

(N)  The Company has signed an agreement to acquire all of the outstanding stock
     of Power Technologies,  Inc. ("PTI").  PTI will be merged into a subsidiary
     of the Company.  PTI provides  engineering  consulting  services,  develops
     computer  software  for use by utility  companies,  develops  and  conducts
     educational  courses and  develops  customized  computer  hardware.  At the
     closing, the  purchase  price will be paid in common  stock of the  Company
     having a value of $9 million.  Along with  certain  other  contingent  cash
     considerations  related to a specific  project,  the PTI  shareholders  may
     receive additional shares of the Company's stock having a value of up to $8
     million based on meeting  certain  performance  requirements  over the next
     five years.  In the event of a contingent  payout,  the number of shares of
     common  stock  issued will be based on the stock  price used in  connection
     with the initial closing. On August 11, 1998, the Shareholders of PTI voted
     to adopt the merger agreement.

(O)  Certain financial  statement items have been reclassified to conform to the
     current year's presentation. For the three and six month periods ended June
     30,  1998,  the  Company  made   reclassifications   between   general  and
     administrative expenses and cost of revenue.

(P)  Although the Company  continues  to have  possible  liabilities  related to
     environmental  pollution and other legal actions,  management believes,  on
     the basis of its assessment of these matters,  including  consultation with
     counsel,  that  none of these  pending  legal  actions  nor  such  possible
     liabilities  will result in payments of amounts,  if any, that would have a
     material  adverse effect on the Company's  financial  position,  results of
     operations or earnings per share calculations.


                                       9

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
        Notes to Condensed Consolidated Financial Statements (Unaudited)
                                  (Continued)

     The Trans-Pacific  Petrochemical  Indotama ("TPPI") project continues to be
     suspended  pending  resolution of financing  issues by the client,  and the
     project  is not  expected  to  resume in 1998.  The  Company  has  obtained
     approval to resell or use  committed  materials  and procured  equipment to
     reduce  costs  of  project  suspension.  The  Company  believes  that it is
     unlikely that the project will be cancelled. Had the project been cancelled
     as of June 30, 1998,  the Company would have  recorded a pre-tax  charge of
     approximately $54 million representing project working capital plus current
     procurement  commitments  net of the  estimated  salvage  value of procured
     equipment and materials.

     A joint  venture,  in which the  Company is a 50 percent  owner,  submitted
     claims to recover in excess of $112  million in  connection  with scope and
     specification  changes on a major petrochemical project in the Middle East.
     The  Company  believes  that the joint  venture  will  realize  substantial
     recovery on these  claims.  The  potential  value of any  recovery on these
     claims has not been reflected in the Company's financial results.

(Q)  In June 1997, the Financial  Accounting Standards Board (the "FASB") issued
     Statement of Financial  Accounting  Standards No. 131,  "Disclosures  about
     Segments  of  an  Enterprise  and  Related   Information."  This  Statement
     specifies new guidelines for determining a company's operating segments and
     related  requirements  for  disclosure.  The  Company is in the  process of
     evaluating  the  impact  of the new  standard  on the  presentation  of the
     financial   statements  and  the  disclosures  therein.  The  Statement  is
     effective for fiscal years  beginning  after December 15, 1997. The Company
     will adopt the new standard for the fiscal year ending December 31, 1998.
     
     In  February  1998,  the FASB  issued  Statement  of  Financial  Accounting
     Standards  No.  132,  "Employers'  Disclosures  about  Pensions  and  Other
     Postretirement  Benefits." This Statement  revises  employers'  disclosures
     about pension and other  postretirement  benefit plans.  It does not change
     the  measurement or recognition of those plans.  The Statement is effective
     for fiscal years  beginning after December 15, 1997. The Company will adopt
     the new standard for the fiscal year ending December 31, 1998.
     
     In June 1998, the FASB issued Statement of Financial  Accounting  Standards
     No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities."
     This Statement  provides a  comprehensive  and consistent  standard for the
     recognition  and  measurement of  derivatives  and hedging  activities.  It
     requires  that an entity  recognize  all  derivatives  as either  assets or
     liabilities  in the  statement  of  financial  position  and measure  those
     instruments  at fair value.  The  Statement is  effective  for fiscal years
     beginning  after June 15, 1999.  The Company will adopt the new standard by
     January 1, 2000.  Management  is evaluating  the impact this  Statement may
     have on the Company's financial statements.






                                       10

<PAGE>

Item 2.  Management's Discussion and Analysis of Results of Operations and
         Financial Condition

                 Stone & Webster, Incorporated and Subsidiaries
                     Management's Discussion and Analysis of
                  Results of Operations and Financial Condition


The following is  management's  discussion  and analysis of certain  significant
factors that have affected the financial  condition and results of operations of
Stone & Webster,  Incorporated and Subsidiaries  (the "Company") for the periods
noted.  This  discussion  and analysis  should be read in  conjunction  with the
Company's 1997 Annual Report on Form 10-K.  The earnings per share  calculations
disclosed are the same for both basic and diluted.

Results of Operations

For the quarter  ended June 30,  1998,  the Company  reported  revenue of $317.0
million,  an increase of 10.7  percent from the $286.3  million  reported in the
second  quarter of 1997.  Operating  income  for the  quarter  was $1.2  million
compared with $13.0 million for the second  quarter of 1997.  Net income for the
quarter  ended June 30, 1998 was $0.7 million or $0.05 per share,  compared with
net income of $9.5  million or $0.74 per share for the same period in 1997.  For
the  quarter  ended June 30,  1997,  net income  included  recognition  of a net
operating tax loss carryforward  benefit in an international  subsidiary of $1.5
million ($0.12 per share).  New orders were $147.9 million for the quarter ended
June 30, 1998 compared with $243.9 million for the second quarter of 1997.

Revenue for the six months ended June 30, 1998 was $611.0 million  compared with
$635.8 million  reported for the same period in 1997, a decrease of 4.0 percent.
Operating  income  for the first six months of 1998 was $12.8  million  compared
with  operating  income of $21.9 million for the same period in 1997. Net income
for the six  months  ended  June 30,  1998 was $8.3  million or $0.64 per share,
compared  with net  income  of $15.0  million,  or $1.17  per share for the same
period in 1997.  Backlog for the first six months of 1998 was $2.4 billion which
decreased $0.1 billion compared to December 31, 1997, and decreased $0.4 billion
compared  to June 30,  1997.  New  orders  for the first six months of 1998 were
$434.3 million compared to $893.8 for the same period in 1997.

Components of earnings per share were:

                                                Three Months        Six Months
                                               Ended June 30,     Ended June 30,
                                               1998     1997      1998     1997
                                               ----     ----      ----     ----
Basic and diluted earnings per share from:
 Operations                                   $(0.19)  $0.47     $0.01    $0.69
 Pension related items                          0.24    0.21      0.48     0.42
                                              ------   -----     -----    -----
 Ongoing operations                             0.05    0.68      0.49     1.11

 Divested operations                               -    0.06         -     0.06
 Asset divestiture                                 -    0.15         -        -
                                              ------   -----     -----    -----
 Basic and diluted earnings per share         $ 0.05   $0.74     $0.64    $1.17
                                              ======   =====     =====    =====



                                       11

<PAGE>

                 Stone & Webster, Incorporated and Subsidiaries
                     Management's Discussion and Analysis of
                  Results of Operations and Financial Condition


Pension related items reduced  operating costs by $5.1 million and $10.2 million
for the  quarter  and six months  ended June 30,  1998,  respectively,  and $4.5
million and $9.0 million for the same periods in the prior year. Pension related
items include a net pension credit for the Company's domestic subsidiaries and a
net pension cost for its foreign subsidiaries.  The pension credit is the result
of a plan  that is funded in excess  of the  projected  benefit  obligation  and
income from the amortization of Statement of Financial  Accounting Standards No.
87 net transition asset. The plan is overfunded primarily due to favorable asset
performance. The transition asset will be fully amortized in 1998.

During the first  quarter of 1998,  the Company  completed  the  divestiture  of
underutilized office space with the sale of its Cherry Hill, New Jersey,  office
building for $13.5 million in cash. The Company recognized a gain on the sale of
this property of $3.1 million ($2.0 million after tax or $0.15 per share).  Also
in the first quarter the Company  completed the disposal of its remaining unused
office space in its former New York corporate  offices.  The provisions  made in
1996 for  losses on  sublease  or lease  cancellation  of this  space  have,  in
aggregate,  not been  materially  different  from the actual  costs  incurred in
disposal of the excess space.

Engineering, Construction and Consulting

The Company's Engineering,  Construction and Consulting segment reported revenue
of $309.4  million in the second  quarter of 1998,  an increase of 10.3  percent
from the $280.4 million  reported for the same period last year. The increase in
revenue  is  primarily  attributable  to higher  procurement  on  several  power
projects and revenue from Belmont Constructors  Company,  Inc. ("Belmont") which
the Company acquired in January 1998. These items were partially offset by lower
revenues  in  the  Process   Division   primarily   due  to  suspension  of  the
Trans-Pacific Petrochemical Indotama ("TPPI") project. Operating income was $0.3
million for the second  quarter of 1998  compared to $13.7 million in the second
quarter of 1997. The decrease in operating  income is primarily due to losses of
$10.2 million on two Power Division projects,  one in the Middle East and one in
Africa and to  provisions  of $4.0  million  for  anticipated  losses on several
projects in the Process Division. For the quarter ended June 30, 1997, operating
income  included  $1.1  million  of  cash   distributions  from  the  Binghamton
Cogeneration  Partnership  and the  recognition  of a $6.6 million  charge ($4.3
million after tax or $0.33 per share)  representing Stone & Webster's share of a
loss on a contract  that had been awarded to an  international  joint venture in
1994.

The  Trans-Pacific  Petrochemical  Indotama  project  continues  to be suspended
pending  resolution  of  financing  issues by the client and the  project is not
expected to resume in 1998.  The Company has obtained  approval to resell or use
committed   materials  and  procured   equipment  to  reduce  costs  of  project
suspension.  The Company  believes  that it is unlikely that the project will be
cancelled. Had the project been cancelled as of June 30, 1998, the Company would
have recorded a pre-tax charge of approximately $54 million representing project
working  capital  plus  current  procurement  commitments  net of the  estimated
salvage value of procured equipment and materials.

For the first six months of 1998, the  Engineering,  Construction and Consulting
segment had  revenue of $596.5  million,  a decrease of 4.6 percent  compared to
revenue of $625.1 million for the same period in 1997.  Operating income for the
first six months of 1998 was $11.3  million  compared with  operating  income of
$23.7 million for the same period in 1997.

                                       12

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
                     Management's Discussion and Analysis of
            Results of Operations and Financial Condition (Continued)

New orders for the  Engineering,  Construction  and  Consulting  segment for the
quarter  and six months  ended  June 30,  1998 were  $147.9 and $434.3  million,
respectively,  compared  with $243.9 and $893.8  million for the same periods in
1997. In the second  quarter the Company  announced the award of a contract with
Energy Management,  Inc. in excess of $200 million for engineering,  procurement
and  construction  of two 265 MW power plants in New England.  This award is not
included in backlog  because the Company has not yet  received  notification  to
proceed with the work pending final project financing  arrangements.  During the
quarter,  the Company also announced a $19 million  contract for engineering and
steel procurement on a 2 x 250 MW coal-fired power plant in China.

Orders  and  backlog  for the six months  ended June 30,  1998 and 1997 were (in
thousands):

                                      Three Months             Six Months
                                     Ended June 30,          Ended June 30,
                                    1998        1997        1998        1997
                                    ----        ----        ----        ----
    Beginning backlog            $2,518,628  $2,792,801  $2,519,302  $2,487,552
    Orders                          147,881     243,907     374,360     893,842
    Backlog acquired (Belmont)            -           -      59,944           -
    Revenue                        (309,387)   (280,374)   (596,484    (625,060)
                                 ----------  ----------  ----------  ----------
    Ending backlog               $2,357,122  $2,756,334  $2,357,122  $2,756,334
                                 ==========  ==========  ==========  ==========

Orders represent the net amount of new orders, cancellations and scope changes.

Cold Storage And Related Activities

The Company's Cold Storage segment reported operating income of $2.3 million and
$4.6 million for the quarter and six months  ended June 30, 1998,  respectively,
compared  with  operating  income of $2.0  million and $3.2 million for the same
periods in 1997.  Revenue was $7.6 million and $14.5 million for the quarter and
six months  ended June 30,  1998,  respectively,  compared  with revenue of $5.9
million and $10.7 million for the same periods in 1997.  The increase in revenue
and  operating  income of the Cold Storage  segment is  primarily  the result of
increased volume and continued expansion of the customer base.

General and Administrative Expenses, Other Income (Expenses) and Income Taxes

General and  administrative  expenses  for the quarter and six months ended June
30, 1998 were $15.5 million and $31.6 million, respectively, compared with $17.7
million and $34.7 million for the same period  periods in 1997.  The decrease in
general  and  administrative  expenses  for the  quarter  ended June 30, 1998 is
primarily  attributable  to lower occupancy costs as a result of the divestiture
of unused office space.  Interest expense net of interest income for the quarter
ended June 30, 1998 was $0.3 million and interest income net of interest expense
for the first six months was $0.5 million,  compared with interest income net of
interest  expense  for the  quarter  and six  months  ended June 30 1997 of $0.6
million and $1.0 million, respectively.


                                       13

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
                     Management's Discussion and Analysis of
            Results of Operations and Financial Condition (Continued)

Financial Condition

Cash and cash equivalents decreased by $51.7 million during the first six months
of 1998.  Net cash used for operating  activities of $97.3 million  reflected an
increase in operating working capital (which consists of accounts receivable and
costs and revenues  recognized in excess of billings  less accounts  payable and
billings  in  excess  of  costs  and  revenues  recognized)  due to  procurement
commitments on the TPPI project,  funding  requirements of the recently acquired
Belmont Constructors  Company, Inc. and working capital requirements for several
projects.  Net cash provided by investing  activities of $31.7 million  reflects
maturities  of U.S.  Government  securities  and  proceeds  from the sale of the
Company's Cherry Hill, New Jersey,  office building offset by purchases of fixed
assets  used  in the  Company's  operations.  Net  cash  provided  by  financing
activities  of $13.9  million  reflects the payment of  dividends,  repayment of
long-term debt, borrowings under a bank loan, and purchases of common stock. The
Company's  ongoing  share  repurchase  program  is  discussed  in  Note H to the
condensed  consolidated  financial  statements.  Total debt was $43.5 million at
June 30,1998, compared to $24.3 million at year-end 1997.

The Company believes that the types of businesses in which it is engaged require
that it maintain a strong financial  condition.  The Company has on hand and has
access  to  sufficient  sources  of  funds to meet  its  anticipated  operating,
dividend and capital  expenditure needs. Cash on hand and temporary  investments
provide adequate operating  liquidity.  Additional liquidity is provided through
lines of credit and revolving  credit  facilities  that total $33.4 million.  At
June 30, 1998, there was $20.0 million outstanding under these facilities.

Other Accounting Matters

The  Company  is in  the  process  of  evaluating  and  upgrading  its  computer
applications, in part, to ensure  their functionality  with respect to the "year
2000"  change.  At  present,  the  Company  does not  anticipate  that  material
incremental costs will be incurred in any single future year.

In June 1997,  the  Financial  Accounting  Standards  Board (the "FASB")  issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of  an  Enterprise  and  Related  Information."  This  Statement  specifies  new
guidelines  for   determining  a  company's   operating   segments  and  related
requirements  for  disclosure.  The Company is in the process of evaluating  the
impact of the new standard on the  presentation of the financial  statements and
the disclosures  therein.  The Statement is effective for fiscal years beginning
after  December 15, 1997. The Company will adopt the new standard for the fiscal
year ending December 31, 1998.

In February 1998, the FASB issued  Statement of Financial  Accounting  Standards
No.  132,  "Employers'  Disclosures  about  Pensions  and  Other  Postretirement
Benefits." This Statement revises employers' disclosures about pension and other
postretirement  benefit plans. It does not change the measurement or recognition
of those plans.  The  Statement is effective  for fiscal years  beginning  after
December 15,  1997.  The Company will adopt the new standard for the fiscal year
ending December 31, 1998.

                                       14

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
                     Management's Discussion and Analysis of
            Results of Operations and Financial Condition (Continued)

In June 1998, the FASB issued  Statement of Financial  Accounting  Standards No.
133,  "Accounting  for  Derivative  Instruments  and Hedging  Activities."  This
Statement  provides a comprehensive and consistent  standard for the recognition
and  measurement  of  derivatives  and hedging  activities.  It requires that an
entity  recognize  all  derivatives  as  either  assets  or  liabilities  in the
statement of financial position and measure those instruments at fair value. The
Statement  is  effective  for fiscal years  beginning  after June 15, 1999.  The
Company will adopt the new standard by January 1, 2000. Management is evaluating
the impact this Statement may have on the Company's financial statements.



Forward-Looking Information

Any of the  statements or comments in this Form 10-Q that refer to the Company's
estimated  or future  results are  forward-looking  and  reflect  the  Company's
current analysis of existing trends and information. The Company cautions that a
variety of factors  including,  but not  limited to, the  following  could cause
business  conditions and results to differ  materially from what is contained in
forward-looking statements: changes in the rate of economic growth in the United
States and other major  international  economies,  changes in  investment by the
energy, power and environmental  industries,  the uncertain timing of awards and
contracts,  changes in  regulatory  environment,  changes in project  schedules,
changes in trade, monetary and fiscal policies worldwide, currency fluctuations,
outcomes of pending and future  litigation,  protection  and validity of patents
and other intellectual  property rights,  and increasing  competition by foreign
and  domestic  companies  and  other  risks  detailed  from  time to time in the
Company's filings with the Securities and Exchange Commission.


















                                       15

<PAGE>

PART II.   Other Information
Item 4.    Submission of Matters to a Vote of Security Holders.


(a)  The Annual  Meeting of  Shareholders  of the registrant was held on May 14,
     1998.

(b)  At the Annual Meeting, Frank J. A. Cilluffo, David N. McCammon and J. Angus
     McKee were re-elected as Directors for terms expiring in 2001. The terms of
     office as Directors of Donna F. Bethell,  Kent F. Hansen,  Elvin R. Heiberg
     III, John P. Merrill,  Jr., Bernard W. Reznicek,  H. Kerner Smith and Peter
     M. Wood continued after the meeting.

(c)  At the Annual Meeting,  the Shareholders  also approved the adoption of the
     Stone & Webster,  Incorporated Annual Incentive Compensation Plan, approved
     the  adoption  of the Stone &  Webster,  Incorporated  Long-Term  Incentive
     Compensation   Plan,   and   ratified   the   selection   of  the  firm  of
     PricewaterhouseCoopers  L.L.P. independent  accountants,  as auditor of the
     registrant and its subsidiaries for the year ended December 31, 1998.

     The total votes cast for,  withheld  or  against,  as well as the number of
     abstentions and broker non-votes as to each such matter were as follows:

     (1)  Election of Directors

                                             Total Votes
                Nominee                    For          Withheld

          Frank J. A. Cilluffo          10,927,366      719,097
          David N. McCammon             11,017,924      628,539
          J. Angus McKee                11,000,658      645,805

                         There were no broker non-votes.

     (2)  Approval of the Annual Incentive Compensation Plan

               Total Votes For                9,340,035
               Total Votes Against            1,329,608
               Total Abstentions                200,756

                      There were 776,064 broker non-votes.

     (3)  Approval of the Long-Term Incentive Compensation Plan

               Total Votes For                7,026,562
               Total Votes Against            3,621,932
               Total Abstentions                222,405

                      There were 775,564 broker non-votes.



                                       16
<PAGE>

     (4) Selection of Independent Accountants.

               Total Votes For               11,288,858
               Total Votes Against              270,077
               Total Abstentions                 87,528

                         There were no broker non-votes.


Item 5.    Other Events

The text of  registrant's  press  release  dated August 12, 1998 relating to the
acquisition  of a company  involved in the  ownership  and  operation  of public
refrigerated  warehouses  is  attached  hereto  as  Exhibit  99  and  is  hereby
incorporated herein by reference.


Item 6.    Exhibits and Reports on Form 8-K

(a)  Exhibit Index

     (4)   Instruments  defining  the  rights  of  security  holders,  including
           indentures.

           As of June 30, 1998,  registrant and its subsidiaries had outstanding
           long-term debt (excluding  current  portion)  totaling $21.6 million,
           principally in connection  with a mortgage  relating to real property
           for a subsidiary's office building and in connection with capitalized
           please  commitments for the acquisition of certain office  equipment.
           None of these  agreements  are filed  herewith  because the amount of
           indebtedness  authorized under each such agreement does not exceed 10
           percent of the total assets of the registrant and its subsidiaries on
           a consolidated  basis;  the registrant  hereby  undertakes to furnish
           copies of such agreements to the Commission upon request.

     (27)  Financial Data Schedule.

     (99)  Text of Press Release.

(b)  Reports on Form 8-K

     Registrant  did not file any  reports on Form 8-K during  the  quarter  for
     which this report is filed.


                                       17

<PAGE>

                 Stone & Webster, Incorporated and Subsidiaries
                                
                                
                                    FORM 10-Q
                                
                                
                                   SIGNATURES


     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                              STONE & WEBSTER, INCORPORATED




                              By:  /S/ THOMAS L. LANGFORD
Dated:  August 12, 1998            Thomas L. Langford
                                   Executive Vice President
                                   (Duly authorized officer and
                                    Chief Financial Officer)




                                   /S/ DANIEL P. LEVY
                                   Daniel P. Levy
                                   Vice President and Controller
                                   (Principal Accounting Officer)

















                                       18