<PAGE>
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington,  D. C.  20549

                                 Form 10-Q

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

      For the Quarterly Period
      Ended December 31, 1996               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 report.


   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 preceeding 12 months (or for 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 close of the period covered by
   this report.

              Class                       Outstanding at December 31, 1996
   _____________________________          _________________________________

   Common stock, $1.00 par value                 1,454,742 Shares
<PAGE>
                             PEERLESS MFG. CO.

                                  INDEX



                                                                    Page
                                                                   Number
  Part I:   Financial Information                                _________

            Condensed Consolidated Balance Sheets for the
            periods ended December 31, 1996 and June 30, 1996         3

            Condensed Consolidated Statements of Earnings for the
            three and six months ended December 31, 1996 and 1995     4

            Condensed Consolidated Statements of Cash Flows for
            the six months ended December 31, 1996 and 1995           5

            Notes to the Condensed Consolidated Financial
            Statements                                                6

            Management's Discussion and Analysis of Financial
            Condition and Results of Operations                     7 - 9


  Part II:  Other Information                                         10

            Exhibits                                               11 - 12

            Signatures                                                13


























                                      2 of 13
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<TABLE>
                                         PEERLESS MFG. CO.
                                CONDENSED CONSOLIDATED BALANCE SHEETS
                                                              <C>           <C>    
                                                               DECEMBER 31,    JUNE 30,
                                                                   1996          1996
                                                              _____________ _____________
<S>                                                           
               ASSETS                                           (UNAUDITED)     (AUDITED)
     Current assets:
        Cash and cash equivalents                                  $140,831    $2,082,329
        Short term investments                                      248,950       246,659
        Accounts receivable                                      11,355,273     8,700,762
        Inventories:
           Raw materials                                          1,044,908     1,094,774
           Work in process                                        3,043,315     2,757,798
           Finished goods                                            18,395       286,393
        Deferred income taxes                                       226,214       226,214
        Other                                                       330,522       620,072
                                                                -----------   -----------
              Total current assets                               16,408,408    16,015,001

     Property,plant and equipment-net                             1,423,676     1,213,859
     Property held for investment-net                               920,913       948,775
     Other assets                                                   380,280       453,390
                                                                -----------   -----------
                                                                $19,133,277   $18,631,025
                                                                ===========   ===========
        LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities:
        Notes payable                                              $400,000            $0
        Accounts payable-trade                                    4,327,413     4,329,645
        Advance payments from customers                           1,159,595       435,549
        Commissions payable                                         745,614       566,766
        Accrued liabilities                                         834,053     1,332,441
                                                                -----------   -----------
           Total current liabilities                              7,466,675     6,664,401

     Deferred income taxes                                           86,768        86,768

     Stockholders' equity:
        Common stock-authorized 4,000,000 shares of $1 par
          value; issued and outstanding, 1,454,742 shares at
          September 30, 1996 and 1,446,742 at June 30, 1996       1,454,742     1,446,742
        Additional paid-in capital                                2,562,129     2,489,879
        Unamortized value of restricted stock issue                 (89,275)      (33,750)
        Cumulative foreign currency translation adjustment          (25,453)       23,842
        Retained earnings                                         7,677,691     7,953,143
                                                                -----------   -----------
                                                                 11,579,834    11,879,856
                                                                -----------   -----------
                                                                $19,133,277   $18,631,025
                                                                ===========   ===========

<FN>
     The accompanying notes are an integral part of these statements.
                                             3 of 13
</TABLE>
<PAGE>
<TABLE>
                                        PEERLESS MFG. CO.
                                  CONDENSED STATEMENTS OF EARNINGS
                                           (UNAUDITED)

                                                               Three Months Ended               Six Months Ended
                                                           __________________________     ___________________________

                                                                  December 31,                    December 31,
                                                           __________________________     ___________________________
                                                           <C>             <C>            <C>            <C>             
                                                              1996            1995            1996            1995
                                                           __________      __________     ___________     ___________
<S>
    Net sales                                              $9,761,204      $9,206,547     $17,276,653     $15,307,009
    Cost of goods sold                                      6,722,071       6,501,070      12,127,299      11,254,278
                                                           ----------      ----------      ----------      ----------
          Gross profit                                      3,039,133       2,705,477       5,149,354       4,052,731

    Operating expenses
      Marketing and engineering                             2,255,765       1,927,711       4,346,493       3,710,133
      General and administrative                              504,290         365,979         900,547         672,946
                                                           ----------      ----------      ----------      ----------
          Operating earnings(loss)                            279,078         411,787         (97,686)       (330,348)

    Other income(expense)
       Interest                                                  (993)         15,531          11,003          30,112
       Sundry                                                 156,067         (36,649)        182,741         (31,239)
                                                           ----------      ----------      ----------      ----------
                                                              155,074         (21,118)        193,744          (1,127)
                                                           ----------      ----------      ----------      ----------
       before Federal Income Tax                              434,152         390,669          96,058        (331,475)

    Federal Income Tax
       Current                                                 64,799         111,324           7,825        (117,586)
       Deferred                                                     0               0               0               0
                                                           ----------      ----------      ----------      ----------
                                                               64,799         111,324           7,825        (117,586)
                                                           ----------      ----------      ----------      ----------
    Net earnings(loss)                                        369,353         279,345          88,233        (213,889)
                                                           ==========      ==========      ==========      ==========

    Earnings(loss) per common share                             $0.25           $0.19           $0.06          ($0.15)
                                                           ==========      ==========      ==========      ==========

    Weighted average number of common
       shares outstanding                                   1,454,742       1,446,742       1,454,101       1,446,742
                                                           ==========      ==========      ==========      ==========

    Cash dividend per common share                             $0.125          $0.125          $0.250          $0.250
                                                           ==========      ==========      ==========      ==========



<FN>
    The accompanying notes are an integral part of these statements.
                                              4 of 13
</TABLE>
<PAGE>
<TABLE>
                                  PEERLESS MFG. CO.
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (UNAUDITED)

                                                      For the six months ended
                                                            December 31,
                                                     _________________________
                                                     <C>          <C>
                                                         1996          1995
                                                     ____________ ____________
<S>  
 Cash flows from operating activities:
 Net earnings(loss) from operating activities            $88,233    ($213,889)
    Adjustments to reconcile net earnings to net
       cash provided (used) by operating activities:
          Depreciation and amortization                  166,561      167,121
          Other                                           24,725       31,679
          Changes in assets and liabilities
             (Increase) decrease in:
                Accounts receivable                   (2,654,511)  (1,340,884)
                Inventories                               32,347     (687,169)
                Other current assets                     289,550      (34,590)
                Other assets                              61,124      256,349
             Increase (decrease) in:
                Accounts payable                          (2,230)     884,050
                Commissions payable                      178,848     (119,578)
                Advance payments from customers          724,046      572,340
                Accrued liabilities                     (498,388)     (64,314)
                                                      ----------   ----------
                                                      (1,677,928)    (334,996)
                                                      ----------   ----------
 Net cash (used in) provided by continuing operations (1,589,695)    (548,885)

 Cash flows from investing activities:
    Net purchases of short term investments               (2,291)     (11,105)
    Purchase of equipment net of disposals              (336,531)     (28,198)
                                                      ----------   ----------
 Net cash used in investing activities                  (338,822)     (39,303)

 Cash flows from financing activities:
    Dividends paid                                      (363,686)    (361,696)
    Net borrowing                                        400,000            0
                                                      ----------   ----------
 Net cash used in financing activities                    36,314     (361,696)

 Effect of exchange rate on cash                         (49,295)      (4,604)
                                                      ----------   ----------
                Net increase (decrease) in cash
                   and cash equivalents               (1,941,498)    (954,488)

 Cash and cash equivalents at beginning of period      2,082,329      961,747
                                                      ----------   ----------
 Cash and cash equivalents at end period                $140,831       $7,259
                                                      ==========   ==========
<FN>
 The accompanying notes are an integral part of these statements
                                      5 of 13
</TABLE>
<PAGE>
                             PEERLESS MFG. CO.

           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1.   In the opinion of the Company, the accompanying unaudited
     consolidated financial statements contain all adjustments,
     consisting of only the normal recurring accruals, necessary
     to present fairly its financial position as of December
     31,and June 30, 1996 and the results of operations and cash
     flows for the six months ended December 31, 1996 and 1995.

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 adjusted backlog of uncompleted orders and letters of
     intent at December 31, 1996 was approximately $24,800,000 as
     compared to a December 31, 1995 backlog of $19,000,000.  The
     Company has scheduled approximately 90% of the backlog for
     shipment in the third and fourth quarters of the current
     fiscal year.

4.   The Company has a formal agreement with a bank for a
     $5,000,000 continuing line of credit, renewable annually.
     Under the terms of this agreement, 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 $400,000 outstanding under this line at
     December 31, 1996, and no loans outstanding December 31,
     1995.

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










                                  6 of 13
<PAGE>
                             PEERLESS MFG. CO.
                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
               FINANCIAL CONDITION AND RESULTS OF OPERATIONS



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.



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 $1,941,498 from June 30, 1996.
Company operations used $1,589,695 of cash during the six months
ended December 31, 1996.  Additional uses of cash for the six
months ended December 31, 1996 included expenditures of $336,531
for fixed asset acquisitions and dividend payments of $363,686.

As indicated, operations used $1,589,695 of cash in the six
months ended December 31, 1996.  Funds used in operations were
primarily from increases in accounts receivable of $2,654,511 and
payments of accounts payable and accrued liabilities of $2,230
and $498,388 respectively.  These uses of cash were offset by
provisions by advances from customers and increases in
commissions to agents of $724,046 and $178,848 respectively, and
decreases in inventories, and other assets of $32,347 and
$350,674 respectively.

The Company has historically financed 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 addition
to retained earnings, the Company has from time to time used a
short-term bank credit line of $5,000,000 to supplement working
capital.  At December 31, 1996 the Company had currently drawn
down $400,000 on this line of credit.  The Company has no
material commitments for capital expenditures other than its
established program of maintaining existing plant and equipment.







                                  7 of 13
<PAGE>
Changes - Second Quarter of Fiscal 1997 vs. Second Quarter 1996
---------------------------------------------------------------


Results of                2nd Qtr.              Six Months
Operations               1997 vs.1996         1997 vs. 1996
-------------------  --------------------  ---------------------

Sales                   $554,657 increase    $1,969,644 increase
                             6.0%                 12.9%
Sales for the three months ended December 31, 1996 compare
favorably to sales for the three months ended December 31, 1995.
Sales for the six months ended December 31, 1996 compare
favorably to sales for the six months ended December 31, 1995
reflecting increased product shipment and fewer delays by
customers in taking product as scheduled.


-------------------  --------------------  ---------------------

Gross Profit            $333,656 increase    $1,096,623 increase
                           12.3%                  27.1%
Gross profit increase resulted from increased sales recorded in
the three months ended December 31, 1996.  Gross profit as a
percent of sales was 31.1% for the three months ended December
31, 1996 vs. 29.4% for the three months ended December 31, 1995.
The increase in the gross profit percentage in the current
quarter and six month period was primarily due to the higher
profits available on the mix of products shipped in Fiscal 1997
vs. Fiscal 1996.



-------------------  --------------------  ---------------------

Operating Expenses        $466,365 increase    $863,961 increase
                             20.3%                19.7%
Operating expenses increased $466,365 from second quarter Fiscal
1997 vs. second quarter Fiscal 1996.  This increase is primarily
attributable to agent commissions and engineering expenses of
approximately $160,000 each, and other administrative expenses of
approximately $140,000.  These increases reflect the operating
expenses as a base to realize additional sales as reflected in
the increased sales and gross profits realized in the three
months ended December 31, 1996 vs. the three months ended
December 31, 1995.











                             8 of 13
<PAGE>




-------------------  --------------------  ---------------------

Other Income(Expense)    $176,619 increase     $194,871 increase

Changes in other income reflect gains related to foreign exchange
transactions of approximately $168,000 in the three months ended
December 31, 1996 vs. losses related to foreign exchange
transactions  of approximately $28,000 in the three months ended
December 31, 1995.




-------------------  --------------------  ---------------------

Net Earnings (Loss)      $90,008 increase      $302,122 increase

The increase in net earnings for the three months ended December
31, 1996, when compared to the preceding Fiscal year, reflects
the foreign exchange gains and reduction of taxes of
approximately $196,000 and $46,000 respectively offset by
decreases in operating earnings and interest income of
approximately $133,000 and $16,000 respectively.






























                             9 of 13
<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, 1996.  For the three months ended December
     31, 1996 there were no new proceedings filed against the
     Company.


Item 4 -- Submission of Matters to a Vote of Security Holders
-------------------------------------------------------------
     The Company held its annual meeting on November 21, 1996.
     At this meeting, the shareholders elected as directors of
     the Company, Sherrill Stone, Donald A. Sillers, Jr., David
     D. Battershell, Bernard S. Lee, and Joseph V. Mariner, Jr.
     The tabulation of the votes with respect to the election of
     directors is as follows:

          Nominee            Shares For          Shares Withheld
         ---------           ----------          ---------------
     Sherrill Stone           1,299,098              10,048
     Donald A. Sillers, Jr.   1,297,368              11,778
     David D. Battershell     1,298,368              10,778
     Bernard S. Lee           1,298,905              10,241
     Joseph V. Mariner, Jr.   1,295,393              13,753

     The shareholders approved the adoption of the Peerless Mfg.
     Co. 1995 Stock Option and Restricted Stock Plan.  The
     tabulation of the votes with respect to the approval of the
     Plan is as follows:

                  For              900,347
                  Against          122,641
                  Abstain           11,767
                  Non-Votes        274,391


Item 9 -- Exhibits and Reports -- Form 8-K
------------------------------------------
     There were no reports on Form 8-K for the three months ended
     December 31, 1996.








                             10 of 13
<PAGE>



EXHIBITS:


3(a)      The Company's Articles of Incorporation, as amended to
          date (filed as Exhibit 1 to the Company's Registration
          Statement on Form S-1, Registration No. 2-35767, and
          amended by the Company's December 12, 1990 Form 8
          amending Exhibit 3(a) to the Company's Annual Report on
          Form 10-K dated June 30, 1990, 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, 1993, 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).











                             11 of 13
<PAGE>









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


10(f)     Loan Agreement, dated as of December 14, 1993, between
          NationsBank of Texas, N.A. and the Company (filed as
          Exhibit 10(f) to the Company's Annual Report on Form
          10-K for the fiscal year ended June 30, 1994, and
          incorporated herein by reference).


10(g)     Second Amended and Restated Loan Agreement, dated as of
          February 13, 1995, by and between NationsBank of Texas,
          N.A. and the Company (filed as Exhibit 10(g) to the
          Company's Annual Report on Form 10-K for the fiscal
          year ended June 30, 1996, and incorporated herein by
          reference).


10(h)     Third Amended and Restated Loan Agreement, dated as of
          December 12, 1995, by and between NationsBank of Texas,
          N.A. and the Company (filed as Exhibit 10(f) to the
          Company's Annual Report on Form 10-K for the fiscal
          year ended June 30, 1996, 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









                             12 of 13
<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. -- Registrant



Dated: February 14, 1997





/s/ SHERRILL STONE                 /s/ KENT J. VAN HOUTEN
------------------------------     -------------------------------
Sherrill Stone                     Kent J. Van Houten
Chairman, President and            Secretary - Treasurer and
Chief Executive Officer            Chief Financial Officer






















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