FORM 10-Q
                                
                       SECURITIES AND EXCHANGE COMMISSION
                                
                             Washington, D. C. 20549
                                
           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                                
                  For the quarterly period ended June 30, 1997
                                
                                       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 Incorporation) (IRS Employer Identification No.)
                                
                                
                                
                                
                       245 Summer Street, Boston, MA 02210
               (Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number (including area code) (617) 589-5111


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:  12,800,182 shares as of June 30, 1997.

<PAGE>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

      The consolidated financial statements required by this Item for Stone & 
      Webster, Incorporated and Subsidiaries are contained in Attachment A
      which is filed herewith and made a part hereof.
     
Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations.
     
      The Management's Discussion and Analysis of Financial Condition and 
      Results of Operations required by this Item for Stone & Webster, 
      Incorporated and Subsidiaries is contained in Attachment A which is
      filed herewith and made a part hereof.


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 8, 1997.

      (b)  At the Annual Meeting, Donna F. Bethell, Kent F. Hansen, Elvin R. 
           Heiberg III and H. Kerner Smith were re-elected as Directors for 
           terms expiring in 2000.  The terms of office as Directors of 
           Frank J. A. Cilluffo, David N. McCammon, J. Angus McKee, John P. 
           Merrill, Jr., Bernard W. Reznicek, Edward J. Walsh and Peter M.
           Wood continued after the meeting.

      (c)  At the Annual Meeting, the Shareholders also ratified the selection 
           of the firm of Coopers & Lybrand L.L.P., independent accountants,
           as auditor of the registrant and its subsidiaries for the year
           ended December 31, 1997.

      (d)  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             Total Votes For        Withheld

                Donna F. Bethell           10,899,860          1,101,971
                Kent F. Hansen             10,899,371          1,102,460
                Elvin R. Heiberg III       10,898,417          1,103,414
                H. Kerner Smith            10,905,046          1,096,785

                         There were no broker non-votes.

           (2)  Selection of Independent Accountants.

                Total Votes For            11,647,398
                Total Votes Against           220,297
                Total Abstentions             134,136

                         There were no broker non-votes.

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, 1997, registrant and its 
               subsidiaries had outstanding long-term debt (excluding current
               portion) totaling approximately $23,464,000 in connection with
               a mortgage relating to real property for a subsidiary's office
               building. This agreement is not filed herewith because the
               amount of indebtedness authorized under 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 a copy of such agreement to the 
               Commission upon request.
        
          (27) Financial Data Schedule.

      (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.


<PAGE>
                                   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: THOMAS L. LANGFORD
Dated: July 31, 1997       Thomas L. Langford
                           Executive Vice President
                           (Duly authorized officer and
                            Chief Financial Officer)





                           DANIEL P. LEVY
                           Daniel P. Levy
                           Corporate Controller
                           (Principal Accounting Officer)

<PAGE>
                                  ATTACHMENT A


                          Stone & Webster, Incorporated
                                and Subsidiaries

                                      Index

                                                          Page No.

Condensed Financial Statements: (Unaudited)

   Consolidated Statements of Operations -
     Three Months Ended June 30, 1997 and 1996
     Six Months Ended June 30, 1997 and 1996                 6

   Consolidated Balance Sheets -
     June 30, 1997 and December 31, 1996                    7-8

   Consolidated Statements of Cash Flows -
     Six Months Ended June 30, 1997 and 1996                 9

   Notes to Consolidated Financial Statements              10-12

   Management's Discussion and Analysis of Financial
     Condition and Results of Operations                   13-16

<PAGE>
PART 1.  Item 1


                 Stone & Webster, Incorporated and Subsidiaries
                Consolidated Statements of Operations (Unaudited)
        (All dollar amounts, except per share amounts, are in thousands)


                                Three Months Ended        Six Months Ended
                                     June 30,                 June 30,
                                 1997        1996         1997        1996

Revenue (Note A)               $286,258    $268,708     $635,783    $574,542
Cost of revenue (Note I)        265,199     250,062      597,599     534,151
     Gross profit                21,059      18,646       38,184      40,391
Selling, general and
  administrative expenses
  (Note D)                        8,011      11,178       16,334      22,708
Operating income
  (Notes A and D)                13,048       7,468       21,850      17,683
Other income (deductions)
     Interest income              1,004         612        1,834       1,995
     Interest expense              (445)     (2,193)        (872)     (4,415)
      Other                          43           -           43           -
                                    602      (1,581)       1,005      (2,420)
Income before provision for
  income taxes                   13,650       5,887       22,855      15,263
Income tax provision (Note B)     4,168       2,147        7,805       5,991
Net income (Notes A, B and D)  $  9,482    $  3,740     $ 15,050    $  9,272
Earnings per share
  (Notes D and H)                 $0.74       $0.28        $1.17       $0.69
Dividends declared per share      $0.15       $0.15        $0.30       $0.30

Average number of common
  and common equivalent
  shares outstanding         12,913,000  13,307,000   12,911,000  13,474,000


          See accompanying notes to consolidated financial statements.

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
                     Consolidated Balance Sheets (Unaudited)
        (All dollar amounts, except per share amounts, are in thousands)


                                                    June 30,   December 31,
                                                      1997         1996

Assets
Current Assets:
  Cash and cash equivalents                         $ 90,625     $ 57,887
  U.S. Government securities, at amortized cost,
    which approximates market (Note C)                34,829        4,006
  Accounts receivable, principally trade             244,917      181,900
  Costs and revenue recognized in excess of        
    billings                                         134,291      110,023
  Deferred income taxes (Note B)                       8,682       10,275
  Other                                                1,436       30,333
Total Current Assets                                 514,780      394,424
Assets held for sale                                  20,885       20,885
Fixed assets
  At cost, less accumulated depreciation and
    amortization of $159,008 (1996-$154,111)         130,011      127,949
Prepaid pension cost (Note D)                        139,220      129,818
Other assets                                          19,552       18,989

                                                    $824,448     $692,065


          See accompanying notes to consolidated financial statements.

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
                     Consolidated Balance Sheets (Unaudited)
        (All dollar amounts, except per share amounts, are in thousands)

(CONTINUED)

                                                    June 30,   December 31,
                                                      1997         1996

Liabilities and Shareholders' Equity
Current Liabilities:
  Bank loans                                        $      -    $  5,000
  Current portion of long-term debt                    1,697       1,657
  Accounts payable, principally trade                 60,583      76,551
  Billings in excess of costs and revenue
   recognized                                        268,374     103,742
  Accrued liabilities (Note G)                        68,159      91,407
  Accrued taxes                                        6,442       7,164
Total Current Liabilities                            405,255     285,521
Long-term debt                                        23,464      24,260
Deferred income taxes (Note B)                        48,142      43,142
Other liabilities                                     20,726      22,009
Shareholders' Equity (Notes E and F):
  Preferred stock
    Authorized, 2,000,000 shares of no par value;
      none issued                                          -           -
  Common stock
    Authorized, 40,000,000 shares of $1 par
      value; issued, 17,731,488 shares, including
      shares held in treasury                         17,731      17,731
Capital in excess of par value of common stock        50,727      50,480
Retained earnings                                    409,614     398,342
Cumulative translation adjustment                     (2,667)     (2,280)
Common stock in treasury, at cost 4,931,306
  shares (1996-4,896,870)                           (127,275)   (125,724)
Employee stock ownership and restricted stock
  plans                                              (21,269)    (21,416)
Total Shareholders' Equity                           326,861     317,133

                                                    $824,448    $692,065


          See accompanying notes to consolidated financial statements.

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
                Consolidated Statements of Cash Flows (Unaudited)
        (All dollar amounts, except per share amounts, are in thousands)


                                                          Six Months
                                                        Ended June 30,
                                                      1997          1996

Cash Flows from Operating Activities:
  Net income                                         $15,050     $ 9,272
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation and amortization                    6,677       8,871
      Deferred income taxes                            6,593       3,847
      Prepaid pension cost                            (9,402)     (6,360)
      Amortization of net cost of Employee Stock 
        Ownership Plan                                   580         772
      Changes in operating assets and liabilities: 
        Accounts receivable                          (63,017)      4,921
        Costs and revenue recognized in excess of  
          billings                                   (24,268)    (55,741)
        Accounts payable                             (15,968)     (4,984)
        Billings in excess of costs and revenue
          recognized                                 164,632     (14,779)
        Accrued liabilities                            4,865       7,056
        Other                                         (1,851)        951
  Net cash provided (used) by operating
    activities                                        83,891     (46,174)
Cash Flows from Investing Activities:
  Purchases of U.S. Government securities            (34,509)          -
  Maturities of U.S. Government securities             4,000      47,753
  Purchases of fixed assets                           (8,739)    (12,087)
  Net cash (used) provided by investing
    activities                                       (39,248)     35,666
Cash Flows from Financing Activities:
  Repayments of long-term debt                          (756)    (18,564)
  (Decrease) increase in bank loans                   (5,000)     10,000
  Purchases of common stock for treasury              (2,309)    (19,959)
  Dividends paid                                      (3,840)     (4,072)
  Net cash used by financing activities              (11,905)    (32,595)
Net increase (decrease) in Cash and Cash
  Equivalents                                         32,738     (43,103)
Cash and Cash Equivalents at Beginning of Period      57,887      68,417

Cash and Cash Equivalents at End of Period           $90,625     $25,314


          See accompanying notes to consolidated financial statements.

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (Unaudited)
        (All dollar amounts, except per share amounts, are in thousands)


(A)  Revenue and operating income by business segment were the following for
     the three and six months ended June 30, 1997 and 1996:


                                Three Months Ended      Six Months Ended
                                     June 30,               June 30,
                                 1997       1996        1997        1996
Revenue:
  Engineering, construction
    and consulting services   $280,374    $263,712    $625,060    $564,749
  Cold storage and related
    activities                   5,884       4,996      10,723       9,793

    Total revenue             $286,258    $268,708    $635,783    $574,542
Operating income: 
  Engineering, construction
    and consulting services   $ 13,697    $  8,669    $ 23,687    $ 19,954
  Cold storage and related
    activities                   2,021       1,250       3,181       2,452
  Other                              -         (78)          -        (128)

                              $ 15,718    $  9,841    $ 26,868    $ 22,278
General corporate expenses      (2,670)     (2,373)     (5,018)     (4,595)

     Total operating income   $ 13,048    $  7,468    $ 21,850    $ 17,683


(B)  Stone & Webster, Incorporated and Subsidiaries (the Company) had a
     valuation allowance of $11,605 at December 31, 1996 for the deferred tax
     assets related to net operating loss carryforwards.  The valuation
     allowance at the end of the second quarter of 1997 was $8,896.  The net
     change in the valuation allowance for the second quarter of 1997 was a
     decrease of $2,238, due to an increase in the expected realization of 
     certain deferred tax assets and utilization of the foreign net operating
     loss carryforwards.  The valuation allowance at June 30, 1997 is
     comprised of $4,584 relating to the net operating loss carryforwards for
     certain of the Company's foreign subsidiaries and $4,312 relating to
     state net operating loss carryforwards.

(C) U.S. Government securities are debt securities issued by the U.S.
    Treasury comprised entirely of U.S. Treasury bills and notes, which the
    Company intends to hold to maturity. These securities have maturity 
    dates of one year or less.  The aggregate fair market value of U.S.
    Government securities at June 30, 1997 and December 31, 1996 was $34,837
    and $4,003, respectively, and the amortized cost basis at June 30, 1997 
    and December 31, 1996, was $34,829 and $4,006, respectively.

(D) Pension related items, which reduced operating costs, were $4,505 and 
    $9,038 for the three and six month periods ended June 30, 1997 compared
    with $2,949 and $5,944 for the same periods in the prior year.  These
    items increased net income by $2,726, or $0.21 per share, and $5,468, or
    $0.42 per share, for the three and six month periods ended June 30, 1997
    compared with $1,803, or $0.14 per share and $3,635, or $0.27 per share
    for the same periods in 1996.

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (Unaudited)
        (All dollar amounts, except per share amounts, are in thousands)


(CONTINUED)

(E)  As of June 30, 1997, options for 208,625 shares were exercisable and
     98,000 shares were available for grant under the 1995 Stock Option Plan.
     The total number of shares in the Plan was increased by 75,000 shares by
     the Board of Directors on April 21, 1997.  Per share option prices ranged
     from $30.25 to $42.875.

     During the six month period ended June 30, 1997, non- qualified options
     for 253,000 shares of Common Stock were issued to employees at prices
     ranging from $32.125 to $42.875, of which 25 percent becomes exercisable
     on the first anniversary of the date of grant and an additional
     25 percent becomes exercisable on the second, third and fourth
     anniversaries of the date of grant.

     The following is a summary of the activity in the Company's 1995 Stock
     Option Plan for the six month period ended June 30, 1997:

       =============================================
                                          1997

       Outstanding January 1,           471,000
       Options granted                  253,000
       Options canceled                  (1,000)
       Options exercised                (26,000)

       Outstanding at June 30,          697,000
      =============================================

     The 1995 Stock Plan for non-employee directors of the Company was
     terminated effective as of December 31, 1996, by action of the Board of
     Directors, and a new 1997 Stock Plan for non- employee directors of the
     Company was adopted effective January 1, 1997. Under the 1997 Stock
     Plan, non-employee directors of the Company will receive grants of Common
     Stock in payment of part of their annual retainer and may elect to
     receive director meeting fees in Common Stock. The total number of
     shares to be issued under the 1997 Stock Plan may not exceed 100,000
     shares.  Shares issued to non-employee directors during the six month
     period ended June 30, 1997, totaled 2,707. At June 30, 1997, there were
     97,293 shares available for grant.

(F)  In July 1995, the Board of Directors of the Company authorized an
     increase in the share repurchase program from 1 million to 2.5 million
     shares of Common Stock in open market transactions at prevailing prices.
     The Company acquired 63,833 shares in the six month period ended June 30,
     1997, bringing total purchases to 2,218,637 shares under this program. 
     As of June 30, 1997, the Company had 12,800,182 shares outstanding. 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.

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
             Notes to Consolidated Financial Statements (Unaudited)
        (All dollar amounts, except per share amounts, are in thousands)


(CONTINUED)

(G)  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 payment of amounts, if any, that would have a
     material adverse effect on the consolidated financial statements.

(H)  Earnings per share (EPS) calculations are based on the weighted average
     number of common and common equivalent shares (stock options) outstanding
     during the period. In February 1997, the Financial Accounting Standards
     Board issued Statement of Financial Accounting Standards No. 128, "Earnings
     Per Share" (SFAS No. 128).  SFAS No. 128 specifies the computation,
     presentation, and disclosure requirements for EPS. The Company will adopt
     the disclosure requirements of this new accounting standard for this fiscal
     year. The Company believes adoption of the new standard will not have a
     material impact on earnings per share calculations.

(I)  The Company has a noncontrolling interest in an international joint
     venture formed to execute construction projects, which is accounted for
     using the equity method. During the second quarter and six months ended
     June 30, 1997, the Company wrote down its investment in the joint venture
     to fair value, recognized an anticipated loss of $6,584 ($4,280 after tax,
     or $0.33 per share) and accrued for certain other liabilities for its share
     of a project that had been awarded to the joint venture in 1994.

(J)  These statements are unaudited, and in the opinion of management,
     include all adjustments, consisting of normal recurring adjustments
     necessary for a fair statement of the results for the interim periods. The
     year-end balance sheet data was derived from audited financial statements,
     but does not include all disclosures required by generally accepted
     accounting principles. Reference is made to the Consolidated Financial
     Statements included in the Company's Annual Report to Shareholders. Interim
     results of operations are not necessarily indicative of the results for a
     full year.

<PAGE>
Item 2


                 Stone & Webster, Incorporated and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
        (All dollar amounts, except per share amounts, are in thousands)


Results of Operations

For the quarter ended June 30, 1997, Stone & Webster, Incorporated and
Subsidiaries (the Company) reported net income of $9,482, or $0.74 per share,
compared with net income of $3,740, or $0.28 per share for the same period in
1996. Operating income for the second quarter of 1997 was $13,048 compared with
operating income of $7,468 for the second quarter of 1996. Revenue for the
second quarter of 1997 was $286,258, an increase of 7 percent over the $268,708
reported in the second quarter of 1996. Improvements in profitability and
revenue were the result of increased focus on project profitability through
improved project bidding and execution in the Engineering, Construction and
Consulting segment. Backlog decreased $36,467, or 1 percent during the second
quarter of 1997. New orders in the second quarter of 1997 were $243,908 compared
with $731,689 in the same period of 1996. This decrease is due to a second
quarter order of $475,000 in 1996.

For the first six months of 1997, the Company reported net income of $15,050, or
$1.17 per share, compared with net income of $9,272, or $0.69 per share for the
same period in 1996. Operating income for the first six months of 1997 was
$21,850 compared with operating income of $17,683 for the first six months of
1996. Revenue for the first six months of 1997 was $635,783, an increase of 11
percent over the $574,542 reported in the same period in 1996. New orders were
$893,842 compared with $1,446,960 for the first six months of 1996 and backlog
increased to $ 2,756,334 from $2,487,552 at December 31, 1996.

Components of Earnings per Share for the three month and six month periods ended
June 30 were:

                                          Three Months          Six Months
                                         Ended June 30,       Ended June 30,
       Earnings per share from:          1997       1996      1997     1996

       Operations                       $0.47      $0.34     $0.69     $0.81

       Pension related items             0.21       0.14      0.42      0.27

       Divested operations               0.06      (0.20)     0.06     (0.39)

           Earnings per share           $0.74      $0.28     $1.17     $0.69

Earnings per share from operations include a reduction in the valuation
allowance for deferred tax assets of $1,509 (or $0.12 per share) and the
Company's share of the anticipated loss on a contract in an international joint
venture on a project awarded to the joint venture in 1994 of $6,584 ($4,280
after tax, or $0.33 per share).

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
        (All dollar amounts, except per share amounts, are in thousands)


Results of Operations (CONTINUED)


Earnings from divested operations in 1997 represent cash distributions of $1,112
($723 after tax, or $0.06 per share) from the Binghamton Cogeneration
Partnership. The Company's investment in the partnership was written off in the
fourth quarter of 1996. Losses from divested operations in the quarter and six
month period ended June 30, 1996 of $4,503 ($2,703 after tax, or $0.20 per
share) and $8,633 ($5,181 after tax, or $0.39 per share) were related to the
Auburn VPS Partnership and the Binghamton Cogeneration Partnership.

Engineering, Construction and Consulting

The Company's Engineering, Construction and Consulting segment reported revenue
of $280,374 in the second quarter of 1997, an increase of 6.3 percent from the
$263,712 reported for the same period last year. This increase is due to
continued revenue growth in the Process Business Unit. Operating income of
$13,697 for the second quarter of 1997 compared with $8,669 in the same period
last year. Increases in profitability and revenue due to the improvements in
project bidding and execution were affected by a cash distribution of $1,112
($723 after tax, or $0.06 per share) from the Binghamton Cogeneration
Partnership and the recognition of a loss of $6,584 ($4,280 after tax, or $0.33
per share) representing the Company's share of the anticipated contract loss in
an international joint venture.

New orders for the engineering, construction and consulting segment for the
second quarter and six months ended June 30, 1997 were $243,907 and $893,842
compared with $731,689 and $1,446,960, respectively, for the same periods in
1996. Backlog increased from $2,487,552 at December 31, 1996 to $2,756,334 at
June 30, 1997.

Orders and backlog for the three month and six month periods ended June 30, 1997
and 1996 were:


                               Three Months                Six Months
                              Ended June 30,              Ended June 30,
                            1997          1996          1997          1996
Beginning backlog        $2,792,801    $2,331,234    $2,487,552    $1,917,000
Orders                      243,907       731,689       893,842     1,446,960
Revenue                    (280,374)     (263,712)     (625,060)     (564,749)
                                                     
Ending backlog           $2,756,334    $2,799,211    $2,756,334    $2,799,211


Major new awards for the quarter ended June 30, 1997 include $55,000 for
engineering, procurement and construction of the second stage of an
international power station project, $65,000 to provide environmental
remediation services as a subcontractor on a Department of Defense contract,
$31,000 to provide modifications to a coal handling system for a major domestic
utility, and $24,000 to design and build compressor stations for an
international gas company. Orders are the net total of new orders, scope changes
and cancellations.

<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
        (All dollar amounts, except per share amounts, are in thousands)


Results of Operations (CONTINUED)


Cold Storage And Related Activities

The Company's Cold Storage segment reported operating income of $2,021 and
$3,181 for the quarter and six months ended June 30, 1997, compared with $1,250
and $2,452 for the same periods in 1996. Revenue was $5,884 and $10,723 for the
quarter and six months, respectively, compared with $4,996 and $9,793 for the
same periods a year ago. Cold Storage operating results have improved due to the
achievement of higher revenue without incurring additional operating expense.

General Corporate and Other Income (Deductions)

General Corporate expenses for the quarter and six months ended June 30, 1997
were $2,670 and $5,018 compared with $2,373 and $4,595 for the same periods in
1996. Interest income, net of interest expense, for the quarter and six months
ended June 30 1997 was $559 and $962 compared with a net interest expense of
$1,581 and $2,420 for the same periods in 1996. This improvement in interest
expense is primarily due to the divestiture of the Auburn VPS Partnership which
incurred $1,524 and $3,094 of interest expense for the quarter and six months
ended June 30, 1996, respectively.

As of June 30, 1997, the cash and government securities balance was $125,454
compared with $61,893 at December 31, 1996. Total debt was $25,161 compared with
$30,917 at the end of 1996. The improvement of $69,317 in net cash position over
December 31, 1996, is due to an increased focus on working capital management.

Financial Condition

Cash and cash equivalents, as shown in the Consolidated Statements of Cash
Flows, increased by $32,738 during the first six months of 1997. Net cash
provided by operating activities of $83,891 resulted from an improvement 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), resulting primarily from an increased
focus on working capital management. Operating working capital days outstanding
was 16 days on June 30, 1997, which compared favorably to 61 days one year ago.
Net cash used by investing activities of $39,248 primarily reflects purchases of
U.S. Government securities and fixed assets used in the Company's operations.
Net cash used by financing activities of $11,905 reflects the payment of
dividends, repayment of long-term debt and bank loans and purchases of common
stock under the Company's ongoing share repurchase program as explained in
Note F to the consolidated financial statements. Total debt was $25,161 at
June 30, 1997, compared with $30,917 at year-end 1996.


<PAGE>
                 Stone & Webster, Incorporated and Subsidiaries
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
        (All dollar amounts, except per share amounts, are in thousands)


Results of Operations (CONTINUED)


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
working capital lines of credit and revolving credit facilities which total
$23,758, all of which was available at June 30, 1997.

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

The Financial Accounting Standard Board recently issued Statement of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income." This Statement
requires that changes in comprehensive income be shown in a financial statement
that is displayed with the same prominence as other financial statements. The
Statement will become effective for fiscal years beginning after December 15,
1997. The Company will adopt the new standard beginning in the first quarter of
the fiscal year ending December 31, 1998.

In June 1997, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standard No 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 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 will become effective for fiscal years
beginning after December 15, 1997. The Company will adopt the new standard for
the fiscal year ending December 31, 1998.