<PAGE>
                        SECURITIES AND EXCHANGE COMMISSION
                             Washington,  D. C.  20549
                                     Form 10-Q

        (Mark One)
           x      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
         ------
                  SECURITIES EXCHANGE ACT OF 1934

        For the Quarterly Period Ended March 31, 1998

                  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 0-5214
                                 PEERLESS MFG. CO.
-------------------------------------------------------------------------------
              (Exact name of registrant as specified in its charter)


         Texas                                                 75-0724417
-------------------------------------------------------------------------------
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                           identification No.)


2819 Walnut Hill Lane      Dallas, Texas                         75229
P. O. Box 540667           Dallas, Texas                         75354
-------------------------------------------------------------------------------
     (Address of principal executive offices)                  (Zip code)


Registrant's telephone number, including area code    (214) 357-6181


           None
-------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last repor


Indicate by a 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 shorter periods 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.

           Class                             Outstanding at May 15, 1998
-----------------------------            -----------------------------------
Common stock, $1.00 par value                      1,457,492 Shares
<PAGE>
                               PEERLESS MFG. CO.

                                    INDEX



                                                                        Page
                                                                       Number
                                                                    -----------
Part I:   Financial Information

          Item 1: Consolidated Financial Statements

             Condensed Consolidated Balance Sheets for the
             periods ended March 31, 1998 and June 30, 1997.            3-4

             Condensed Consolidated Statements of Earnings for the
             three and nine months ended March 31, 1998 and 1997.        5

             Condensed Consolidated Statements of Cash Flows for
             the nine months ended March 31, 1998 and 1997.              6

             Notes to the Condensed Consolidated Financial Statement   7 - 8

          Item 2: Management's Discussion and Analysis of Financial
           Condition and Results of Operations.                       9 - 12


Part II:  Other Information                                             13

            Exhibits                                                  14 - 15

            Signatures                                                  16

























                                      2 of 15
<PAGE>
<TABLE>
                                    PART  I
                              FINANCIAL INFORMATION
Item 1. Financial Statements
----------------------------

                                PEERLESS MFG. CO.
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                            March 31,       June 30,
                                                                          -----------------------------
                                                                               1998           1997
                                                                          -------------- --------------
<S>                                                                        (UNAUDITED)     (AUDITED)
Assets                                                                    <C>            <C>
Current assets
   Cash and cash equivalents                                                   $539,506       $772,553
   Short term investments                                                       267,844        259,007
   Accounts receivable-principally trade-net of allowance for doubtful
      accounts of $374,591 at March 31, 1998 and $312,450 at
      June 30, 1997                                                           9,803,758      9,671,067
   Inventories
      Raw materials                                                           1,066,460      1,084,890
      Work in process                                                         2,570,726      1,586,213
      Finished goods                                                            265,546        322,752
   Costs and earnings in excess of billings on uncompleted contracts            313,349      1,871,817
   Deferred income taxes                                                        270,096        269,721
   Other                                                                        197,149        298,605
                                                                          -------------- --------------
      Total current assets                                                   15,294,434     16,136,625

Property, plant and equipment-at Cost, less accumulated depreciation          1,535,888      1,527,856
Property held for investment-at Cost, less accumulated depreciation             841,185        888,383
Other assets                                                                    701,176        528,729
                                                                          -------------- --------------
                                                                            $18,372,683    $19,081,593
                                                                          ============== ==============

















<FN>
The accompanying notes are an integral part of these statements.

                                                         3 of 16
</TABLE>
<PAGE>
<TABLE>
                                PEERLESS MFG. CO.
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                            March 31,       June 30,
                                                                          -----------------------------
                                                                               1998           1997
                                                                          -------------- --------------
<S>                                                                        (UNAUDITED)     (AUDITED)
Liabilities and Stockholders' Equity                                      <C>            <C>
Current liabilities
   Notes payable                                                                     $0             $0
   Accounts payable-trade                                                     3,163,387      5,054,532
   Billings in excess of costs and earnings on uncompleted contracts             18,858        363,257
   Commissions payable                                                          982,265        779,474
   Accrued liabilities
      Compensation                                                              619,173        656,082
      Warranty                                                                  390,133        406,903
      Other                                                                     966,698        291,953
                                                                          -------------- --------------
      Total current liabilities                                               6,140,514      7,552,201

Deferred income taxes                                                            99,962         99,962

Stockholders' equity
   Common stock-authorized 10,000,000 shares of $1 par value; issued
      and outstanding, 1,457,492 shares at March 31, 1998 and authorized
      4,000,000 shares; issued and outstanding 1,451,992 at June 30, 1997     1,457,492      1,451,992
   Additional paid-in capital                                                 2,584,721      2,535,221
   Unamortized value of restricted stock grants                                 (61,074)       (44,625)
   Cumulative foreign currency translation adjustment                           (86,750)       (93,944)
   Retained earnings                                                          8,237,818      7,580,786
                                                                          -------------- --------------
                                                                             12,132,207     11,429,430
                                                                          -------------- --------------
                                                                            $18,372,683    $19,081,593
                                                                          ============== ==============

















<FN>
The accompanying notes are an integral part of these statements.

                                                         4 of 16
</TABLE>
<PAGE>
<TABLE>
                                       PEERLESS MFG. CO.
                               CONDENSED STATEMENTS OF EARNINGS
                                          (UNAUDITED)


                                           Three Months Ended            Nine Months Ended
                                               March 31,                     March 31,
                                     ----------------------------- -----------------------------
                                          1998           1997           1998           1997
                                     -------------- -------------- -------------- --------------
<S>                                  <C>            <C>            <C>            <C>
Revenue                                $10,419,822    $14,826,299    $28,667,383    $32,102,952
Cost of goods sold                       6,765,114     11,446,432     18,658,985     23,674,424
                                     -------------- -------------- -------------- --------------
      Gross profit                       3,654,708      3,379,867     10,008,398      8,428,528

Operating expenses
  Marketing and engineering              2,208,071      2,705,972      6,411,681      6,958,340
  General and administrative               544,386        486,248      1,660,663      1,386,795
                                     -------------- -------------- -------------- --------------
      Operating income                     902,251        187,647      1,936,054         83,393

Other income(expense)
   Interest income                           6,158          3,670         21,562         21,264
   Interest expense                         (9,503)       (14,936)       (24,089)       (21,527)
   Foreign exchange gains(losses)           (6,357)       (60,537)       (57,341)       117,135
   Other, net                               (9,178)        (2,585)       (58,131)         9,052
                                     -------------- -------------- -------------- --------------
                                           (18,880)       (74,388)      (117,999)       125,924
                                     -------------- -------------- -------------- --------------
Earnings from operations
   before Federal income tax               883,371        113,259      1,818,055        209,317

Federal income tax
   Current                                 349,747         35,370        699,228         43,195
   Deferred                                (31,582)                      (82,708)             0
                                     -------------- -------------- -------------- --------------
                                           318,165         35,370        616,520         43,195
                                     -------------- -------------- -------------- --------------
Net earnings                               565,206         77,889      1,201,535        166,122
                                     ============== ============== ============== ==============

Basic and diluted earnings per share         $0.39          $0.05          $0.83          $0.11
                                     ============== ============== ============== ==============
Weighted average number of common
   shares outstanding                    1,455,698      1,455,298      1,453,209      1,454,494
                                     ============== ============== ============== ==============

Cash dividend per common share              $0.125         $0.125         $0.125         $0.125
                                     ============== ============== ============== ==============



<FN>
The accompanying notes are an integral part of these statements.

                                                          5 of 16
</TABLE>
<PAGE>
<TABLE>
                                    PEERLESS MFG. CO.
                    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       (UNAUDITED)


                                                                   For the nine months ended
                                                                           March 31,
                                                                 -----------------------------
                                                                      1998           1997
                                                                 -------------- --------------
<S>                                                              <C>            <C>
Cash flows from operating activities
  Net earnings                                                      $1,201,535       $166,122
  Adjustments to reconcile earnings to net cash
     provided by (used in) operating activities
         Depreciation and amortization                                 271,151        244,305
         Other                                                          15,426         39,988
         Changes in operating assets and liabilities
            Accounts receivable                                       (132,691)    (2,846,228)
            Inventories                                               (908,877)    (1,327,394)
            Cost and earnings in excess of billings
                  on uncompleted contracts                           1,558,468      1,039,066
            Other current assets                                       101,081        (33,992)
            Other assets                                              (182,746)        49,126
            Accounts payable                                        (1,891,119)     1,380,651
            Billings in excess of costs and earnings
                  on uncompleted contracts                            (344,399)        64,350
            Commissions payable                                        202,791        377,525
            Accrued liabilities                                        620,503       (554,571)
                                                                 -------------- --------------
                                                                      (690,412)    (1,567,174)
                                                                 -------------- --------------
            Net cash provided by (used in) operating activities        511,123     (1,401,052)

Cash flows from investing activities:
   Net sales (purchases) of short-term investments                      (8,837)       (52,852)
   Net sales (purchases) of property and equipment                    (222,115)      (480,741)
                                                                 -------------- --------------
            Net cash provided by (used in) investing activities       (230,952)      (533,593)

Cash flows from financing activities:
   Net change in short-term borrowings                                       0      1,145,550
   Proceeds from issuance of common stock                               24,524              0
   Dividends paid                                                     (544,935)      (545,529)
                                                                 -------------- --------------
            Net cash provided by (used in) financing activities       (520,412)       600,021
Effect of exchange rate on cash and cash equivalents                     7,194        (89,285)
                                                                 -------------- --------------
            Net increase (decrease) in cash and cash equivalents      (233,047)    (1,423,909)
Cash and cash equivalents at beginning of period                       772,553      2,082,329
                                                                 -------------- --------------
Cash and cash equivalents at end period                               $539,506       $658,420
                                                                 ============== ==============
<FN>
The accompanying notes are an integral part of these statements.

                                                   6 of 16
</TABLE>
<PAGE>
                             PEERLESS MFG. CO.

           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   The accompanying consolidated financial statements of
     Peerless Mfg. Co. and its subsidiaries (the "Company") have
     been prepared by the Company without audit.  In the opinion
     of the Company's management, the financial statements
     reflect all adjustments necessary to present fairly the
     results of operations for the three and nine months ended
     March 31, 1998 and 1997, the Company's financial position at
     March 31, 1998 and June 30, 1997, and cash flows for the
     nine months ended March 31, 1998 and 1997.  These
     adjustments are of a normal, recurring nature which are, in
     the opinion of management, necessary for a fair presentation
     of the financial position and results of operations for the
     interim periods.

     Certain notes and other information have been condensed or
     omitted from the interim financial statements presented in
     the Quarterly Report on Form 10-Q.  Therefore, these
     financial statements should be read in conjunction with the
     Company's Annual Report Form 10-K for the Fiscal year ended
     June 30, 1997 and the consolidated financial statements and
     notes thereto included in the Company's June 30, 1997,
     audited financial statements.

2.   The results for the interim periods are not necessarily
     indicative of the results to be expected for the full year.
     Peerless Mfg. Co. designs and manufactures custom contracted
     pressure vessels and other products to customer
     specifications, sales of which are obtained by competitive
     bids and may result in material sales and profitability
     increases or decreases when comparing interim periods
     between years.  The Company generally recognizes sales of
     custom-contracted products at the completion of the
     manufacturing process, which is normally less than one year.
     The percentage-of-completion method is used for significant
     long-term contracts.

3.   The backlog of uncompleted orders and letters of intent at
     March 31, 1998 was approximately $29,000,000 as compared to
     a March 31, 1997 backlog of $22,200,000.  Of the $29,000,000
     backlog at March 31, 1998, approximately 55% is scheduled to
     be completed in the current fiscal year.

4.   The Company has a formal agreement with two banks for an
     aggregate of $7,500,000 continuing lines of credit,
     renewable annually.  Under the terms of these agreements,
     loans bear interest at the prevailing prime rate and the
     Company is required to pay 1/4 of 1% per annum on the unused
     portion of the facility.  The Company had no loans
     outstanding under these lines at March 31, 1998, and
     $1,145,550 outstanding at March 31, 1997.




                            7 of 16
<PAGE>

5.   The Company consolidates the accounts of its wholly-owned
     foreign subsidiaries, Peerless Europe Limited, Peerless
     International N.V. and Peerless Europe B.V.  All significant
     intercompany accounts and transactions have been eliminated
     in the consolidation.




















































                            8 of 16
<PAGE>

Item 2.   Management's discussion and analysis of financial
-------   -------------------------------------------------
          condition and results of operations.
          ------------------------------------


                             PEERLESS MFG. CO.


This report contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934.  Such
statements are subject to inherent risks and uncertainties, some
of which cannot be predicted or quantified.  Actual results could
differ materially from those projected in the forward-looking
statements as a result of changes in market conditions, increased
competition, or other factors.  The following discussion and
analysis should be read in conjunction with the attached
consolidated financial statements and notes thereto, and with the
Company's audited financial statements and notes thereto for the
fiscal year ended June 30, 1997.


Capital Resources and Liquidity
-------------------------------
As a general policy, the Company maintains corporate liquidity at
a level adequate to support existing operations and planned
internal growth, and to allow continued operations through
periods of unanticipated adversity.

Cash and equivalents decreased by $233,047 from June 30, 1997.
Company operations provided $511,123 and proceeds from issuance
of common stock provided $24,524 for the nine month period ending
March 31, 1998.  Uses of cash for the nine months ended March 31,
1998 included expenditures of $230,952 for purchase of fixed
assets and short-term investments and $544,935 for dividend
payments.

As indicated in the preceding paragraph, cash flows from
operating activities provided $511,123 of cash in the nine months
ended March 31, 1998 when compared to uses of $1,401,052 for the
nine months ended March 31, 1997.

The Company has historically and continues to finance plant
expansion, equipment purchases, acquisitions and working capital
requirements primarily through the retention of earnings, which
is reflected by the absence of long-term debt in the Company's
statement of financial position.  In addition to retained
earnings, the Company has from time to time used two short-term
bank credit lines totaling $7,500,000 to supplement working
capital.  The Company has no material commitments for capital
expenditures other than its established program of maintaining
existing plant and equipment.




                            9 of 16
<PAGE>

REVENUE:  Revenue decreased 30% to $10,420,000 for the three
months ended March 31, 1998 when compared to $14,826,000 for the
three months ended March 31, 1997.  For the nine month period,
revenues decreased 11% to $28,667,000 for the nine months ended
March 31, 1998 when compared to $32,103,000 for the nine months
ended March 31, 1997.  For both periods, the decreases resulted
primarily from a significant $5,000,000 shipment of environmental
equipment to an international customer in the third quarter
ending March 31, 1997.  This decrease was slightly offset by
increased sales volumes to customers for the Company's filtration
and separation products.


GROSS PROFIT:  Gross profit increased 8% to $3,655,000 for the
three months ended March 31, 1998 when compared to $3,380,000 for
the three months ended March 31, 1997.  The increase in gross
profits is primarily attributable to increased sales recorded for
engineering service projects which carry a greater gross profit
margin than the standard or regular custom engineered and
fabricated products sold by the Company.  For the nine month
period, gross profit increased 19% to $10,008,000 for the nine
months ended March 31, 1998 from $8,429,000 for the nine months
ended March 31, 1997.

For the three and nine month period, a change in the mix of
products sold in Fiscal 1998 compared to Fiscal 1997 also
contributed to the increase in gross profits.  Sales revenue on
engineering services, nuclear steam dryers and commercial mist
extractors have a lower percentage cost of goods than the
Company's traditional line of pressure vessels, allowing for
increased gross profits as a percentage of revenues.  For the
nine months ended March 31, 1998, percentage of revenue generated
from engineering services and sales of nuclear steam dryers and
commercial mist extractors increased as compared to the nine
months ended March 31, 1997.


OPERATING EXPENSES:  Operating expenses decreased 14% from
$3,192,000 for the three months ended March 31, 1997 to
$2,752,000 for the three months ended March 31, 1998.  Operating
expenses also decreased 3% from $8,345,000 for the nine months
ended March 31, 1997 to $8,072,000 for the nine months ended
March 31, 1998.  The declines in both periods reflect the
decrease in commissions and engineering expenses associated with
the $5,000,000 shipment of environmental equipment shipped to an
international customer recorded in the third quarter ended March
31, 1997.  General and administrative expenses increased
primarily due to various cost increases associated with increased
profits, and various accruals for profit sharing and compensation
plans.







                            10 of 16
<PAGE>

OTHER INCOME/(EXPENSE):  The Company recognized net other expense
of $19,000 and $118,000 for the three and nine months ending
March 31, 1998 for interest, foreign exchange losses and the
settlement of an employee issue in the nine month period.  These
expenses compare favorably to the $74,000 other expense for the
three months ended March 31, 1997 and unfavorably to the $126,000
other income for the nine months ended March 31, 1997.  Foreign
exchange loss of $6,000 for the three month period ending March
31, 1998 compare favorably to the foreign exchange loss of
$61,000 for the three month period ending March 31, 1997.  For
the nine month period, foreign exchange losses of $57,000 compare
unfavorably to the foreign exchange gain of $117,000 for the nine
month period ending March 31, 1997.



YEAR 2000 ISSUE:  The Company embarked on a program of upgrading
its current computer system in 1996 and the Year 2000 Issue was
addressed.

The Company has reviewed and continues to monitor its exposure to
the SEC's Staff Legal Bulletin No. 5 regarding the Year 2000
Issue.  The Company believes that the cost of addressing the Year
2000 Issue will not be material or create uncertainty that would
cause reported financial information not to be necessarily
indicative of future operating results or financial condition.
Further, the Company believes that any cost or any consequences
of incomplete or untimely resolution of any Year 2000 Issues will
not represent a known material event or uncertainty that is
reasonably expected to affect the Company's future financial
results, or cause the Company's reported financial information
not to be necessarily indicative of future operating results or
future financial condition.


SOUTHEAST ASIA:  The Company does not anticipate any material
affect on the demand for its products in Southeast Asia as a
result of the current financial crisis there.  Oil and gas
products in the area contribute hard currency and currently
continue to be scheduled.  Secondary projects financed in local
currencies are expected to experience some delays.  The Company
is hopeful that demand for its products in Mexico and South
America may offset the potential for reduced opportunities in
Southeast Asia.  However, there can be no assurances that the
Company's results of operations will not be materially and
adversely affected by the Asian financial situation.











                            11 of 16
<PAGE>

RESTRUCTURING:  At the Annual Shareholders Meeting conducted
November 20, 1997, Mr. Stone, Chairman and Chief Executive
Officer of the Company, announced its organizational
restructuring and reorganization of its two separation and
filtration units into one combined group.  The restructuring and
reorganization was designed to lower costs of goods and improve
on time delivery of product.   The restructuring is complete and
the Company continues to audit the results of this process.

















































                            12 of 16
<PAGE>

                        PEERLESS MFG. CO.

                             PART II

                        OTHER INFORMATION


Item 1 -- Legal proceedings
---------------------------
     Reference is made to Form 10-K Annual Report, as amended,
     Item 3, Page 6, "Legal Proceedings" for the Fiscal year
     ended June 30, 1997.  For the three months ended March 31,
     1998 there were no new proceedings filed against the Company.



Item 6 -- Exhibits and Reports -- Form 8-K
------------------------------------------
     There were no reports on Form 8-K for the three months ended
     March 31, 1998.





































                            13 of 16
<PAGE>

EXHIBITS:

          References to the Company's SEC File Number 0-05214.

3(a)      The Company's Articles of Incorporation, as amended to
          date (filed as Exhibit 3(a) to the Company's Quarterly
          Report on Form 10-Q, dated December 31, 1997, and
          incorporated herein by reference).


3(b)      The Company's Bylaws, as amended to date (filed as
          Exhibit 3(b) to the Company's Annual Report on Form 10-
          K, dated June 30, 1997, and incorporated herein by
          reference).


10(a)     Incentive Compensation Plan effective January 1, 1981,
          as amended January 23, 1991 (filed as Exhibit 10(b) to
          the Company's Annual Report on Form 10-K, dated June
          30, 1991, and incorporated herein by reference).


10(b)     1985 Restricted Stock Plan for Peerless Mfg. Co.,
          effective December 13, 1985 (filed as Exhibit 10(b) to
          the Company's Annual Report on Form 10-K, dated June
          30, 1993, and incorporated herein by reference).


10(c)     1991 Restricted Stock Plan for Non-Employee Directors
          of Peerless Mfg. Co., adopted subject to shareholder
          approval May 24, 1991, and approved by shareholders
          November 20, 1991 (filed as Exhibit 10(e) to the
          Company's Annual Report on Form 10-K dated June 30,
          1991, and incorporated herein by reference).


10(d)     Employment Agreement, dated as of April 29, 1994, by
          and between the Company and Sherrill Stone (filed as
          Exhibit 10(d) to the Company's Annual Report on Form
          10-K for the Fiscal year ended June 30, 1994, and
          incorporated herein by reference).


10(e)     Agreement, dated as of April 29, 1994 by and between
          Company and Sherrill Stone (filed as Exhibit 10(e) to
          the Company's Annual Report on Form 10-K dated June 30,
          1994 and incorporated herein by reference).










                            14 of 16
<PAGE>

10(f)     Sixth Amended and Restated Loan Agreement, dated as of
          January 12, 1998, between NationsBank of Texas, N.A.
          and the Company (filed as Exhibit 10(f) to the
          Company's Quarterly Report on Form 10-Q, dated December
          31, 1997, and incorporated herein by reference).


10(g)     Amended and Restated Loan Agreement, dated as of
          January 12, 1998, by and between Texas Commerce Bank
          National Association and the Company (filed as Exhibit
          10(g) to the Company's Quarterly Report on Form 10-Q,
          dated December 31, 1997, and incorporated herein by
          reference).


10(h)     Peerless Mfg. Co. 1995 Stock Option and Restricted
          Stock Plan, adopted by the Board of Directors December
          31, 1995 and approved by the Shareholders of the
          Company November 21, 1996 (filed as Exhibit 10(h) to
          the Company's Annual Report on Form 10-K dated June 30,
          1997 and incorporated herein by reference).


10(i)     Rights Agreement between Peerless Mfg. Co. and
          ChaseMellon Shareholder Services, L.L.C., adopted by
          the Board of Directors May 21, 1997 (filed as Exhibit 1
          to the Company's Registration Statement on Form 8-A
          (File No. 0-05214) and incorporated herein by
          reference).


21        Subsidiaries of the Company (filed as Exhibit 21 to the
          Company's Annual Report on Form 10-K dated June 30,
          1993, and incorporated herein by reference).


27        Financial Data Schedule.*


*Filed herewith

















                            15 of 16
<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 thereto duly authorized.

                                PEERLESS MFG. CO.



Dated: May 15, 1998





     /s/ Sherrill Stone                 /s/ Kent J. Van Houten
     -----------------------            -------------------------
By:  Sherrill Stone                By:  Kent J. Van Houten
     Chairman, President and            Secretary - Treasurer and
     Chief Executive Officer            Chief Financial Officer

























                            16 of 16